Intrum AB (publ)

Good morning, everyone, from a sunny and seasonably warm Stockholm. As the operator said, this is Andres Rubio.

I'm here with Johan Akerblom, our CFO. And thank you for joining us today to go through in a little bit more detail our results for Q2 2025.

As usual, Johan and I will make comments based on the presentation, and then we will open it up for Q&A, which some have already lined up their questions. If we can turn to Page 3, please.

Before I get into the specifics on the performance in the quarter that's outlined on this page, it is important, particularly for those of you who follow the company over the longer term, that we recognize that this quarter is the best EBIT performance we've had since before we repositioned the company in '23 and actually since '22. It's important to note that back then, our business had a very different configuration.

We then were primarily dependent upon our investing business. And in fact, our portfolio back then was approximately SEK 40 billion.

Today, it's SEK 23 billion. So what we have over the last 2 to 3 years is really our repositioning is bearing fruit.

Servicing has taken up the mantle and performed extremely strongly and replaced earnings from what was a business dependent upon borrowing and investing in assets. And we have reconfigured our investing as well to not only include our own investing, but also partnership capital.

And so on all fronts, I think our repositioning is starting to really bear fruit, and this is a very important quarter, demonstrating that. The other thing that happened, and I would not -- I'd be remiss if I didn't mention it before we got into the details of the presentation, and many of you saw it is, last night, I'm very happy to report that we closed the recapitalization.

Looking back a year ago as to where we were from a delivery perspective, where we were from a bond price perspective, where we were from a shareholder price as well as ownership perspective, we are in a much, much better place today, and it's incredibly personally gratifying. And I think it's thanks to everyone at the company from the Board to the management team to all the employees, all our external stakeholders and the support you all demonstrated that we are in this much better place today than we were as recently as 12 to 15 months ago.

So let's jump into the quarter on Page 3. Overall numbers, quite strong.

EBIT increased nearly 30%, driven by strong servicing, but also with improvement in EBIT across both businesses. More importantly, that EBIT is falling to the bottom line, SEK 324 million in the quarter is 3x higher than what we produced in the first quarter of SEK 100 million.

We expect that more and more of our EBIT improvement will fall to the bottom line and that net income will accelerate going forward. Our leverage ratio is structurally higher that was expected as we flagged to the market and many of the analysts have put into their reports.

What we see now going forward is now that the comparability with disposed assets is out of the numbers, and we will close -- we've closed our restructuring and we will reflect that in next quarter's numbers. What you'll see is that 4.8 billion continuing to deliver going forward as we dedicate our cash flow to 2 activities, investing and deleveraging.

Going through the 2 businesses, servicing on the bottom left, EBIT -- well, income decreased 7%. We do have a picture on income overall that decreased 9% across the company.

About 4% of that decrease is foreign exchange. Of the remaining 5% of the increase in aggregate or on a consolidated basis, roughly half comes from servicing, half comes from investing.

And really, on the servicing side, it comes down to a few markets in Southern Europe, which have very large asset bases and that collect more than have new inflows. So by definition, their assets are declining.

until that stabilizes, we manage them for cash flow. Of the remaining businesses, I'm happy to report that we are growing, but growing slightly, and we'd like to improve that growth, and I'll get into that a little bit later, but we are growing in almost all of our other markets.

EBIT increased almost 50%, really driven by margin. We're at 24% compared to 17% a year ago.

And I've been asked a number of times by both analysts and reporters, well, now that you're at nearly 25%, are you going to be content and take your foot off the pedal? Absolutely not.

We can deliver better results for our clients with a higher margin for our profitability and for our shareholders going forward. I'll get into a little bit more of that as we go through the presentation.

On investing, we had a great quarter in collections, 106% of active forecast, 112% against our original forecast. Income was down 12% because our assets were down 12%, but our EBIT was actually up in the quarter.

And our new investments, we're taking a very prudent approach, both because we were in the recapitalization also because we don't see in some markets, the risk or the return relative to the risk, we have been prudent and disciplined in our deployment. We deployed less than our target and less than last year, but at much higher IRRs.

I think as you see us going forward, and we continue to develop our partnership with Cerberus in particular, you will see us invest higher volumes and slightly more moderated IRRs going forward. And then the top right on strategic initiatives, I mentioned the recapitalization.

I'll talk about it a little bit more, and then Johan will go through some details in his section, but this is an incredible milestone. We are turning the page on what was an important development, but it's one that now positions us to deliver on our business plan.

We have a capital structure that's aligned with our business plan and that allows us to deliver on our business plan. We are -- and I'll get into a little bit of this, engaging in active measures to improve our servicing top line in those markets -- in all markets, but in particularly those markets which have more flow business and are not big asset business.

And we continue to roll out technology. It's going to be a very important next leg in the improvement of our delivery as well as the improvement of our margins, and we continue to roll out Ophelos, and I'll get into more details on that, but we dramatically increased the number of cases that we migrated to that platform from 30,000 in April to more than 200,000 in June.

We expect that migration pace to continue into the year-end. And as it covers a greater and greater level of our activity to then start delivering real profitability impact.

The next page, please. Just to give highlights, overall, top left, servicing margin, dramatic increase.

We expect this to continue. and that's both on a quarter-on-quarter and an RTM basis.

Great collections. The vast majority of our P&L from investing comes from collecting in our back book, and then it's supplemented slightly by new investments.

Collecting at 106 is a great performance, and we could only do that by virtue of the fact that we're combining our industrial collections platform with an investing platform. If we were separate, we would not have this strong performance and the strong P&L performance.

And despite the fact that our -- as I said earlier, but it's worth emphasizing again, despite the fact that our book is down 12% and our income is down 12%, our EBIT is up in that business of investing. Overall, our cost/income ratio is something we're very focused on.

It is much lower. Johan will show later on our absolute cost base coming down.

We expect that trend to continue and are taking measures to make sure we continue to be more efficient. And very important milestone, recapitalization.

So it's been a very busy last few months, and it's a very important turning point for our development in our journey. Next page.

Taking a bit of a look at the market. The market continues to be supportive of demand for our services.

And as CEO of this company, I speak to all the top banks. I speak to all our top industrial clients.

Every single one says that their customers are under stress and that they need us more and more. That's not surprising given the environment.

Consumer credit remains elevated. The cost of that consumer credit remains elevated.

Consumer confidence is on a negative trend. And there's still inflation in some markets.

And then when you look at the banks alone, and the banks are not our only clients because we have investors who own NPLs and we have industrial clients who need our services. But looking at the banks as an indication, despite the fact that everyone points to very low nonperforming loan ratios, you're still talking about very large aggregate figures, SEK 400 billion in Stage 3 loans right now.

So the environment continues to be supportive for our business and for our services. That being said, I think we do need to recognize that our journey over the last year and having gone through the recapitalization inevitably has probably muted our ability to expand our business.

And I think with closing the recapitalization, we're turning the page on that, we should hopefully see some positive effects going forward. On servicing on Page 6, please.

You see the trend dating back a few years, our margin figures continue to improve. The second quarter is a seasonally strong quarter, and we hit 24% in that margin.

We have 23% on a trailing 12-month basis EBIT margin, very strong performance. We have -- and it's broad-based.

You see here the improvements in margins across regions, 11 percentage points in the North, 7 percentage points in the middle, Southern Europe with 6 percentage point increase in margin. I think what that tells you is that we have a more diversified, stronger, higher quality of servicing earnings than we've ever had.

When you do see the revenue picture here on an organic growth basis, you see the drag in Southern Europe, which is principally driven by Spain, Greece and to a lesser degree, the other Southern European countries. And then on the other ones, you see us basically flat on an RTM basis.

In the quarter, we grew slightly, and that's where we want to really improve while stabilizing Southern Europe and managing that for cash flow until it stabilizes and then managing it for growth. So the picture in servicing is quite strong and quite broad-based.

In terms of efforts on the next page, Page 7, in terms of efforts to improve our top line development, it is something of prime focus for us. We are doing a number of things.

We're strengthening our commercial teams. We are significantly expanding our sales force in all our markets.

We want to do more for our existing clients. We want to do new things for our existing clients.

We want to find new clients. And we do that with more people on the ground, delivering what we believe to be the best product in the marketplace.

We do have targeted growth initiatives in addition to just purely feet on the ground on the sales. We have this in our investing business with new asset classes.

We have it with new partners. We have it also in our servicing business, doing other things that can lead to higher conversion ratio on the same level of assets or greater.

New product sales are important. Our delivery is being transformed.

It's much more -- it's going to be much more technological going forward. Technology delivery is fundamental to providing a solution to our clients.

And as a result, we're not just adding salespeople, we're also adding product salespeople who have a more technical ability to liaise with our clients and make sure that not just the sales process, but also the onboarding process, which typically takes 3 to 6 months. Hopefully, with technology, we can shorten that, and we can deliver more sooner for our clients.

That means we have to be much more product-oriented, as you've heard me say before, and we are doing that with not just the delivery of our product, but also the sales of our product. And then the capital partnership.

It's a very important driver, not just of our investing business. In the first half of the year, it's been a very important driver of our servicing business.

The performance on the asset -- on the deals we've done with service has been very good, and that has then consequently led to an important contribution to what you already see here in terms of very good servicing numbers. And as that capital partnership improves and scales up, we're going to see that servicing benefit, but we're also going to see investment management fees, which today are modest, but will become more meaningful going forward.

And we're going to see -- our own investment returns scale up. On the next page, on Page 8, we look at a familiar graph, which looks at our history.

I mean, our business -- our investing business is incredibly strong over the long term and in the latest quarter. Over the long term, we've been at 105 of active or current forecast, 107 of original forecast.

During this past quarter, we're at 106 of current forecast and 112 of original forecast. And what this tells you is that the fact that we're combining an industrial capability that deals with SEK 200 billion of assets on behalf of clients in 20 markets, 75,000 clients, and we're putting an investing business alongside it means we can drive positive returns.

We can look at returns on granular assets across all these markets in large scale with a high degree of certainty on our forecast, and therefore, we can put money behind it, our own and our partners' money behind it. That is, in my opinion, and I've been in this business a long time, even before I was at Intrum, I've always said that long term, those players like Intrum, who have an industrial capability and capital alongside their own and partnership capital are going to, over the long term, do much better than purely opportunistic capital sources as an example.

Page 9 is one of my favorite slides, as you've heard me say already before, we continue to deliver for society. we help 4.5 million people in the last 12 months become debt-free.

These are individuals who are excluded from our financial system and can reintegrate as a result of dealing with these issues. We do so and we deal with people at very delicate times, yet they give us a very good customer satisfaction rating.

And it's important to point out that, that customer satisfaction rating of 4.0 out of 5 is overall, when we employ technology, interestingly enough, we collect more and have lower cost, but we also have a higher customer satisfaction score. So we expect that as technology becomes a more important part of our interaction with customers to improve.

And we deliver in large scale. We collected SEK 121 billion in the last 12 months, of which SEK 8 billion is our own -- on our own portfolios.

The remaining 113 million approximately is for our clients. So we continue to deliver for clients while giving customers a good experience and helping them get out of what is a very difficult situation.

The last page before I hand it over to Johan is Page 10. It's about our technological rollout.

During the quarter, we rolled out Ophelos to 2 additional markets, Portugal and Italy. Early results in both of them, in particular, Portugal, are very positive, higher collections, lower cost, higher customer satisfaction.

We will -- we are in 8 markets now. And by the end of the year, we'll be in 11 or 12 markets that will cover the majority, majority being 60-plus percent of our revenue.

So what you will see is that Ophelos will cover a big part of our industrial activity by the end of the year. But to fully capture that value, we need to migrate cases to it.

And we've made a big step during the last quarter. In April, we migrated 30,000 cases to the platform.

In June, we migrated more than 200,000 cases. That migration pace will continue to accelerate into the end of the year, such that we have an increasing percentage of our total case load that's on that platform.

And as that happens through the end of the year, what we'll see going into next year is that those anecdotal impacts in specific markets of higher collections and lower costs are going to be bigger in scale and across more markets and produce a tangible profit impact for us going into next year and beyond. Genesis Cloud is also a very important way that we're transforming our contact centers.

It's in 13 markets. It's a state-of-the-art process that allows and gives our call center or contact center employees greater tools to be -- to deal with customers in a more efficient and effective basis, and we continue to roll that out alongside of fellows and continue to make our collections process both more effective and efficient.

With that, I'll turn it over for the financials to Johan.

Okay. Thank you, Andres.

So if we move to Page 12, one of the key things that has -- it hasn't happened in the quarter, but it happened yesterday is that we closed the transaction, the recapitalization. I think with that, we've been asked many, many times, what's the cost of this process.

So I think here, finally, we are now showing the numbers. These are not final because there are still a bit of moving parts, fairly minor, I would say.

But all of this will go into our Q3 results. But just to give you sort of the high level, there's a debt derecognition.

This is related to the haircut of 10%. That's roughly SEK 3.5 billion.

Again, these are all affected by FX fluctuations. Then we have a fair value gain debt recognition.

This is related to the issuance of the new bonds. This one will be finalized once we have the prices on where the new bonds trade.

That's why it's a TBD. Then we have the cost for the equity issued, which is 10% of the shares.

That is based on yesterday's market cap. And then finally, we have the transaction cost, which is SEK 2.1 billion.

It's a big number. But I think we need to remember that there's basically 3 components in this.

The first one is that we have paid fees to the banks for basically supporting us with the reconstruction. We have then paid our advisers.

And then finally, we have paid all the advisers to the creditors. So those are the 3 components.

Net-net, this will all lead to a gain in the P&L that you will see when we publish the Q3 numbers. And I think it's also important here to mention that, I mean, first of all, now the new bonds have been exchanged.

They are -- should be tradable as of per today. The equity has been issued, should be tradable as of today.

There is also a new rating that has just been released by Standard & Poor's on the company and on the new money notes and on the exchange notes. The corporate is rated at CCC+.

The exchange notes, they are rated at CCC+ and the new money notes are rated B. Standard & Poor is -- sorry, Standard & Poors has released Moody's are in progress of releasing ratings.

And I mean, one thing that is just anecdotal. I mean, when we started this transaction, which was probably -- you could debate when it started, but let's assume it's sort of end of Q1, beginning of Q2 last year, I think our market cap was fundamentally lower than it is today.

And if we look at sort of how all stakeholders are coming out, I think it's a very balanced transaction. And as we said from the beginning, it's a proactive transaction, has been very amicable.

And now we finally are out and we can move on and we turn the -- turn into the next chapter. Moving on with the financials for this quarter.

I think the way we phrased this is it's another solid quarter. A few things that I think we like to highlight.

I mean, cost-income ratio is improving, even though the income has decreased, mainly driven by the FX. So cost income has improved not only via-vis last year, it has also improved via-vis last quarter.

I think the EBIT increase is significant. And as Andres mentioned, this is the highest EBIT since -- highest Q2 EBIT since 2022.

And I think here, again, the investment book was much, much higher and the company has fundamentally changed since then. And I mean, net income of SEK 324 million in this quarter, that's 3x what we had in Q1.

It's also, I think, again, a testament to that we're really focusing now on delivering profit. And the leverage ratio, this is just an effect of the discontinued business rolling out, and that's the increase.

Otherwise, there's basically no change on the leverage ratio. But again, this is one of the key focus areas we will have and we've had going forward that the leverage ratio needs to continue to -- it needs to start going down on a like-for-like basis.

Moving to the next page, Page 14. On the cost side, I mean, the trend continues.

We're now on a Q2 run rate of SEK 12 billion if we just extrapolate Q2 isolated. The rolling 12 months is at SEK 12.9 billion.

FTEs are down 14%. We're now at 8,855.

And yes, there is no sort of change in focus. Cost will be one of the key levers going forward.

And we will continue to find new measures and continue with the existing measures to be more efficient and still deliver what our clients and our customers' needs. On Page 15, going into servicing, I think, again, the EBIT margin, not only the adjusted EBIT margin, but also the EBIT margin is increasing and improving.

When do we get to sort of a sustainable level on this? I think 25% is our target.

I think we're getting very close to achieving that. Then the question is how far -- I mean, how far can we go?

I think this comes back to our operational efficiency and how well we can run this and how automated we can make our platforms. So I think that's something we will explore going forward.

Other than that, I think if you look at the external income, there's a decrease of 7%. I mean a lot of that is actually on the back of FX.

And what's interesting is if I look at -- we have basically made some growth issues in 3 markets. If I -- if we just remove those markets, we are having growth -- external growth in the rest of the markets combined.

Let's move to investing. I think a lot of has already been said.

I think, again, highlighting that the income moves along with how the portfolio moves. The EBIT is, however, up on a year-on-year basis.

We've seen good progress on our JV side. In particular, it's the front book and it's orange that has been delivering better than expected, whereas the back book or the old JVs are delivering as expected, but not overperforming.

And I think coming back to the investments, I mean, we have the discipline, but I also must say we have a promising pipeline. So we expect that the Q3 number will be higher than what we had in Q2.

On the net debt on Page 17, I mean, it's fairly flattish. There's a small decrease.

I think on the underwriting side, we have slightly higher, again, displaying the discipline we have in our underwriting. And on the cost of funding, I mean, this is now increasing as per today.

And we expect that the new cost of funds will be roughly 7%, depending, of course, where the reference rate sits. Some of it is still floating.

And we don't expect that we will sort of make any major adjustments on our IRR levels for the new investments. We want to keep discipline.

We want to invest high, but we also are carefully thinking about how we can increase the volumes. Page 18, I think we've shown this before.

Just a reminder, this is the new maturity profile. We basically have pushed the debt be '27 and beyond.

And we have fairly equal maturities across the buckets, slightly higher in 228, then it comes down. The new money notes is still -- there we have some flexibility.

It depends on how we see the bonds trading and what we can use them -- make the best use out of them for. Cash and cash equivalents in the quarter stays at SEK 3 billion, flat versus Q1.

And yes, the sensitivity is pretty much the same. And then moving to the last page, which is the financial targets.

So I think we have and will continue to emphasize, we need to find new ways, better ways to address the income growth. That's definitely in the agenda.

We are very confident around the 25% target on the margin. Question is how -- if we can go beyond and what that would be.

On the investing side, I mean, we'd rather see the book increase now than decrease further, but we're also disciplined in our investing, and we have said that SEK 2 billion is the target to invest every year. That's not enough to do replenishing capital.

But we do get the leverage while we invest with our capital partner. And then lastly, on the leverage ratio, focus.

There's a big focus on this. This is where we have to see deleveraging going forward quarter-by-quarter.

That's it. And then handing over to Andres for final closing.

Excellent. Thank you, Johan, and thank you, everyone.

On Page 21, just some recap. Starting with the recapitalization.

Recapitalization completed. The highest second quarter EBIT since '22, really showing that our repositioning is bearing fruit.

We continue to accelerate technology to deliver more and more efficiently at a better margin for our clients. And as a result of that positive servicing margin development for the fifth quarter in a row, we expect that to continue.

And investing collections continue to beat our forecast, which all means we will continue to deliver not just for our clients, but also for our shareholders and for our creditors. So with that, we can wrap up the presentation and immediately go to the Q&A, operator.

So last quarter, you beat on margins while top line was weaker than expected, which was recurring in this quarter too. Have you become more disciplined and selective when choosing your portfolios?

Or is it Cerberus that's holding back as it seems a bit weird for me that you're not scaling up your revenues quicker if your cost control now results in higher margins.

Yes. I mean I think, nice to hear your voice, and thank you for asking the question.

I think you're mixing investing and servicing. You have to look at them separately, I believe.

On the Cerberus joint venture, it is still scaling up. We have been very successful in some regions, Southern Europe and not as successful in other regions where we're probably adapting more our relationship to familiarize Cerebrus with other areas such as Northern Europe.

We have also not pushed it hard because we want to be prudent and disciplined with our deployment of capital, particularly while we were still on the recapitalization. I think what you'll see now going forward is getting back to that SEK 2 billion or slightly higher and then using all excess cash flow above that to deliver.

So -- and that does impact top line. But I think what's interesting also is that the top line in investing is pretty much in line with portfolio.

We dropped 12% versus last year. Our top line dropped 12%.

But our EBIT is actually higher because we're collecting more and we're being better on an industrial basis. So the investing side, I feel good where we are.

And yes, we have a good start, but we do need to continue to scale up the Cerebrus partnership. On the servicing side, it's a different picture.

When you look at our servicing side, about a big percentage of both sides of the decline in top line is FX-oriented, as Johan indicated earlier. But at the same time, it really is driven, as you saw on my page, by Southern Europe and a couple of big markets.

Until those markets stabilize, we will manage them for cash flow. We will still have top line headwinds.

Of the remaining markets, slightly more than half are growing, slightly more than half didn't grow as much in the last quarter. So overall, they did grow slightly, but we want them to grow more.

And that's why I mentioned the tactical initiatives as well as the fundamental initiatives. We want to put more feet on the ground talking to clients, given the quality of our product, we think that will yield results.

I do think that while we haven't lost any clients during the recapitalization, I think it would be naive to think that the recapitalization hasn't impacted some -- on some level, new business as well as new volumes being attributed to us. And I think we will continue to do other things about new products.

I think Ophelos is not just an efficiency. It's also a new product.

It positions us differently with clients. We're already winning mandates with specifically Ophelos as well as our voice AI product.

In the last quarter, we won a couple of mandates with our voice AI product as well as several clients who come to us purely because of Ophelos. So when all of this is put together, we need to regain control of the top line and regain a positive trajectory to the top line while stabilizing those 2 markets that are in structural decline.

I mean it is much more of an involved picture than the top line indicates. But I hope I've addressed your question.

Yes. That's actually very clear.

Second, on your liquidity position, it's SEK 3 billion now at the end of the quarter, which you mentioned. And you're now down with Chapter 11, and you mentioned SEK 2.1 billion on cost on Slide 12.

To make it more clear, can you comment anything on how your liquidity will develop in Q3? Or can you give us a Q2 number on a pro rata level when including the U.S.

and Swedish risk restructuring? Is it SEK 3 billion minus SEK 2.1 billion?

Or does the SEK 2.1 billion include any already paid build costs?

Yes. So I mean, the SEK 3 billion, first of all, it includes quite a lot of costs that we've already taken, okay?

So we've taken a lot of costs along the way because, I mean, we capitalize, we still need to pay the advisers. So the majority of the -- well, almost the majority, I think, out of the SEK 2.1 billion has been paid during the process.

Then the SEK 3 billion of cash, what you don't see here is -- and if you -- maybe if you look at the balance sheet a bit more carefully later on in the cash flow statement, you see that we have actually -- we have not repaid that, but we have not fully drawn some of the capacity we have because we've had excess cash and then we basically use that to draw down some -- or sort of draw up some of the capacity we have. So at closing, we have enough capacity to make the final payments.

So when you look at the cash at the end of Q3, I'm not going to speculate, but we have enough cash to close the transaction because we closed the transaction yesterday. And on top of that, if you remember, as part of the transaction, we also redefined that SEK 75 million of the new money notes would go for general corporate purposes.

So I think that's basically the quick story on the liquidity side.

And I think, Jacob, if I may, just capitalize on the fact that you asked about this figure, just to put it in some greater context for the benefit of all listeners because I'm sure people have questions. It is a big number, the SEK 2.1 billion, just to expand a little bit and put some context around it.

Expanding on what Johan said earlier, about 0.5%, 0.6% or so is fees to the banks. And then of the remaining amount, which are advisory fees, half is our own advisers, half is because the way these processes work is we pay for everyone else's advisers.

I think when you look at the SEK 2.1 billion even including those fees in the context of our SEK 49 billion capital structure that we had when we started this process, it's a little bit over 4%. If you purely look at the advisory fees, it's a little bit under 3%, 2.7%, 2.8% -- and I think you need to look at this because I'm sure many people have questions of this number relative to other restructurings in our industry, other restructurings here in Sweden.

I think it's important to point out that these percentages are kind of modest in terms of a percentage of the total capital structure. We do have a complicated capital structure with 3 different types of securities, 3 different jurisdictions, 3 clearing systems, et cetera.

So the process is complicated. And then more importantly, we're the only process of the ones that I know in our industry or recently in Sweden, where while the shareholders suffered dilution, they still have a meaningful stake in the business, and they're in a much better situation today than they were a year ago.

If you look at our bond prices and our equity prices today versus a year ago, you see that this recapitalization is not just generating the book benefits that Johan actually outlined, but it's generating real benefits for our bondholders and our shareholders in the form of bond prices that are much higher and approaching kind of 90 to a par and shareholders who are at multiples of a year ago.

And I think also being out of the recapitalization, it also means that we can plan our capital much, much better, right? Because beforehand, we had to weigh in how long will the process take?

What's the opposition? What's our -- how much do we want to invest in parallel.

So right now, that just being away from the picture just makes it much easier for us to manage liquidity and optimize how we use the proceeds of cash going forward.

Yes. I know you didn't ask that, Jacob, but I want to just take advantage and provide that context.

So I just had -- starting with the recapitalization. So does it work like that, that you haven't taken any of the SEK 2.1 billion in the P&L so far?

And secondly, is the net tax deductible?

So on the first question, yes, we haven't taken anything through the P&L. It will be in our Q3 because it closed now.

And when it comes to tax deductibility, the vast majority we assume is tax deductible, but there are bits and pieces that will not be tax deductible.

Yes. But that is of the net of everything that, yes, still is out there?

There is a difference between some of them because some of them are related to interest. So no, it's not everything.

But if you look at the pure advisory cost, except for some of the fees, that's what we look at as being tax deductible. But in general, just to be clear, any gain or loss or if you make a gain in a restructuring under Swedish law, all of that is tax deductible.

But then the cost associated with it, transaction costs, you need to just look at how they are fitting into your VAT. But in general, the restructuring is tax deductible.

Okay. And then I was thinking about the -- I think you mentioned before that on the investment side, the collection is deteriorating the older portfolio gets.

And now it looked very good this quarter. So how does that look going forward?

What's your expectation? And also, what do you expect in terms of investment pace going forward?

Sure. It is true that if you look at our investment portfolio in 3 different buckets, our 100% owned back book, which is the oldest piece of the portfolio, then there's the disposed, what we call Project Orange that we sold to Cerberus a little bit more than a year ago that we jointly own now.

And then all of the new investments in what we call Project Blue, which is the new investments in the capital partnership. The later 2 are more fresh and they collect at higher levels.

But the old book continues to perform well and continues to extract a significant amount of capital above and beyond the original forecast. I think it's very important to look at over the history of our company, we have consistently produced much higher than active forecast and much higher than original forecast.

we continue to extract more from what we believed originally to be X to be more than x. So that trend will continue.

Less so, the older things get. That's just the nature of the business.

The older the claim, the more difficult it is to collect. But this is why what I said earlier is so important that when you connect and have in the same roof under the same roof, so to speak, an industrial collections capability as well as an investing capability, you lead to these higher outcomes.

Your trend is correct, but we continue to believe we can outperform going forward. In terms of the pace, we have the SEK 2 billion pace a year.

We are going to work towards that. In fact, we had a very small amount of new investments in the quarter, but we have about SEK 0.5 billion or so of investments that didn't close that we've agreed that we've signed, but just haven't closed for timing purposes, that are closing now in July or definitely during the third quarter.

So these things do not move in a straight line. We expect to get to the SEK 2 billion figure as soon as possible.

Okay. Very good.

So just do I interpret you right, would you say then that the current collection level is representative? Or is it going down the further out we go from here?

I cannot tell you that 106% of active forecast is going to be something that we do on a recurring basis. No.

That is a very, very good outcome. Long term, if we do it right, we should be around 100% of active forecast.

We normally go to 101, 102, that you see more regularly, but 106 is not a recurring.

Yes. And maybe to add to that, I mean, if we perform 1 or 2 quarters in a row, let's say, 106, 107, we have to revalue up, which means that your active forecast will be reset and then you should collect at 100%.

So it's not really fair to sort of compare in that way. You need to look at it sort of from the revaluation standpoint.

Okay. Okay.

And then the last question. When you mentioned the 7% in funding cost, is that based on LIBOR plus credit spread?

Or is that the fixed rate to a large degree? Or how does it work?

I mean this is a mix. So this is the funding mix.

I mean the RCF is based on reference plus margin and then the bonds are fixed. So it's the blended that should run around 7% depending on LIBOR, of course, but that's what the latest swap.

Yes. And you don't swap the bonds to short rates or?

We have -- that's something we haven't discussed yet. That might be happening.

But right now, they're sitting on fixed, and we'll see how we will manage our interest rate risk.

Maybe we can come back to him.

Two quick questions from my side. First of all, going back to the transaction costs.

I'm interested in the cash cost there because I think some of the fees are capitalized. So maybe you can just tell us again what will be the total cash cost, excluding the accrued interest, just the cash fees?

How much have you paid out so far? How much cash outflow is still to come in Q3, basically the pro forma cash balance compared to the SEK 3 billion you reported in Q2?

So as I said, I think out of the cash that will go out in Q3 or has gone out in Q3 is roughly -- it's the majority of the fees to the banks, which we said was sort of SEK 600 million. And then it's roughly -- it's a little bit less than half of the rest of the transaction cost.

Okay. So the SEK 2.1 billion number also includes some noncash fees.

Is that correct? -- fees you capitalized?

That is cash, but some of it has been paid already before.

Already paid. Got it.

Okay. And then the RCF drawing will be in accordance with that, right?

Because your minimum cash need, you like to run the business at maybe SEK 2 billion to SEK 2.5 billion of cash. Is that fair?

Absolutely. I mean, we want to minimize the cash uses and basically, we want to minimize the usage of our RCF if we can.

And then we don't need a lot of cash balance.

Right, right. And then last but not least, on the cost savings side, look, you have done a good job, I think that's fair to say on the cost savings side, especially if I look into adjusted servicing EBIT, right, in '23, I think we were still at SEK 2 billion.

Now LTM, we are at SEK 3.3 billion, so well over 50% growth there in the last 18 months. Now I think people are really interested to understand, can you give us a more quantitative update on the incremental cost savings to come from here, whether through renewed FTE cuts or the run rate benefits from Ophelos and the automating of operational processes.

Is that something we can expect in the next quarter or 2?

You're going to see this going forward. Johan's page indicated that we've come down to roughly, call it, 12-plus billion cost base in total for the company.

We're actually entering -- we'll finish the year this year a little bit below that on a run rate basis. I was asked this morning actually by another -- a reporter actually, now that we've gotten to where we are, are we taking our foot off the pedal?

Are we content? We're not.

We will continue to improve our efficiency. That will include, as I said earlier, automating and standardizing our processes.

which doesn't involve technology, process design. Some of our markets, we've achieved significant activities-based cost reductions just on automating and standardizing processes.

We have been too customized in the past in our processes. That's one element.

The other element is what you indicated, which is Ophelos and also other AI products such as voice AI. When Ophelos goes into a market, we have a technological handling of cases, which is higher collections, lower cost to collect, but also less necessity of human agents.

That will be an important element as we end this year and go into next year, which, as you said, will imply FTE reductions in our contact centers. And then the other element is voice AI, which when we bought Ophelos was not even on horizon on -- we didn't even contemplated.

Today, we have a fantastic voice AI product. We're already winning mandates with clients to use this with them.

This voice AI product effectively takes the place of a human being in dealing with a customer in a phone conversation. We make over 30 million outbound phone conversations a year.

These are conversations, not calls. We can do the vast majority of them with voice AI.

And today, we do them with humans. So what I'm trying to tell you with all of this is I'm not going to give you a specific number, but we believe that there is still a significant room to continue in our margin improvement.

So Andres, is it fair to say that based on the SEK 3.3 billion LTM adjusted servicing EBIT compared to the over SEK 4 billion target you communicated at the CMD, right, you are SEK 700 million or so away now from that threshold. cost savings, efficiency gains will continue to play a very, very important role and a role, I should say, which is in your control, right?

It's not like you are solely dependent now on organic servicing revenue growth.

I think that's completely fair. I think it's the lever that we control, as you correctly say, and we will continue to emphasize.

And if we stabilize and improve our top line, it's all the better. That adds a second leg to our EBIT improvement, which will contribute to us getting to our targets, yes.

We do, Ermin. Sorry for the technical difficulties if it was.

Okay. So we are at 4.8.

Our target remains 3.5 by the end of next year. As I said earlier, this is a structural high point for that leverage ratio.

And from now going forward, you'll see it not just as a result of the recapitalization, which will bring it down a bit, but also the dedication of cash flow to deleveraging, you'll see it declining. until -- up until now, that remains our target.

We will revisit it in the coming quarters, and we will come back to you with a revised target, if necessary, over the coming quarters.

Understood. How should we think about the new investment pace?

It sounds like you would want to accelerate it beyond the SEK 2 billion. And I suppose there's a balancing act there between using organic cash flows to deliver.

But if you invest, you're also accelerating your earnings growth or you're kind of offsetting the decay on the investment side from the book shrinking. But then that perhaps has a little bit longer run rate before it actually impacts the leverage ratio given that you need to invest and then ramp up collections, et cetera.

So how are you thinking between those 2, which one to prioritize?

You've articulated it very well because that's the balancing act that we play on a continual basis. We want to continue to invest and invest at good margins, although the leverage effect is immediate, the investments return and the EBITDA comes in over time.

So it does have an impact. We, as a result of our recapitalization, have significant leeway from our creditors to invest above SEK 2 billion.

We actually have an ability to invest all the way up to replenishment capital, which is well above SEK 3 billion. They've given us that flexibility because they understand the importance of the investments to our profitability and also to their security.

So we play that balancing act. I think right now, we stick to the SEK 2 billion.

When we get to it, we will reevaluate whether we want to go higher. It will be selective.

It will probably be deal by deal. But ultimately, all other free cash flow will be used to deleverage.

I mean I would add to that to say, I mean, until we are at the SEK 2 billion, this is not really an issue because, I mean, the issue right now is that we're not investing all the way because we've just been disciplined. And also to be fair, I mean, we have been very careful on how we deploy our CapEx.

So going forward, we want to get to the SEK 2 billion. We want to continue to focus on the deleveraging.

And then we'll see if we get -- if and when we get to the SEK 2 billion, if we want to reprioritize.

Got it. Then on the servicing side, impressive margin expansion for sure.

But if we're thinking about the top line, you have your target for organic growth there as well. What surprised you since you set that target?

Because I suppose the you're seeing in Southern Europe, that's quite natural given the structure of that business. And it seems like you're kind of implementing an up or out approach to existing clients in the other markets that either margins need to get up or you're willing to churn some customers as well.

So kind of did you expect that you would have more net additions? Or what surprised you that's led to being below that target currently on the organic side?

Yes. I mean I think the reality is that whenever you are bottom line and margin focused, you can improve that, but it does have a top line impact.

There's no doubt about it in general. Secondly, we are, as you correctly identified, selectively managing clients to a higher level of profitability.

And if they don't get to that profitability, we are trying to manage them to-- to managing them out, and that actually creates dislocation at the top line. And I also think what I said earlier is a factor.

I don't -- I think we're somewhat naive if we don't believe that being in the recapitalization when there's another 2 recapitalizations happening in our industry as well as 2 or 3 high-profile ones even having here in Sweden, it does impact a client's confidence in giving us volume. But I think the reality is that has to have happened.

And so all of that probably has led to the phenomenon you've described. I think we are trying to address it head on going forward.

The trends of the kind of managing clients will run its course. We are addressing it directly and trying to regain organic growth where we can, not in those structural markets, but in the other markets, which is the vast majority of our business.

And the recapitalization is done. So we suspect that we will regain meaningful organic growth going forward.

I wanted to ask what are the plans regarding the mandatory tender for the bonds?

I think there will be information coming. I mean we have 60 days post RD to launch it, and we intend to keep that promise.

So to be continued.

Yes. I mean that's an obligation we’re aware of, and we're going to fulfill that obligation.

Exactly. We haven't -- we closed yesterday.

I mean today is the first day.

Yes. And I mean -- but do you plan to launch it in earlier on the 60 days or later given that.

The market.

Sorry?

I said when we decide, we will announce.

Okay. Okay.

What's the current gross multiple for the purchases?

Sorry, I did not follow the question. Could you repeat it, please?

What's the current GMM for the purchases in Q2?

So as you saw in Q2, we invested around a 19% IRR. I think that translates over the life to a money multiple in the high 1s, 1.8, 1.9, something like that.

Okay. That's significantly lower than Q1 at 2.4?

Sorry, 2.3, and we had -- well, 2.38 in Q1 and 2.33 in Q2.

That's gross money multiple. Sorry, I was thinking on a net basis.

I apologize. That's correct.

Okay. Okay.

And those -- around $500 million that you said that you committed to, but you didn't close in Q2, are those at similar multiples to?

Yes.

Okay. Where are you seeing the most attractive multiples?

And how is supply evolving in different regions?

I think the investing business, as I said earlier, we have been very successful and had some very good outcomes in Southern Europe. We have done 17 deals in the last year with Cerberus in 8 different markets and committed about SEK 2.7 billion of about which SEK 0.5 billion is pending closing.

It's been across all regions, but more skewed towards Southern Europe and the better deals have been in Southern Europe that we've leaned into and actually extracted even more cash. And some of those deals have outperformed very, very nicely.

Where we've struggled a bit, as I said earlier, I alluded to earlier, is a bit more in the north of Europe, and we're continuing to address that and look at the market more specifically. We will maintain discipline.

The last thing, and you've heard me say this before, the last thing I ever want to do on investing is chase volume because that leads to mistakes on the underwriting. We will maintain discipline.

We'll be commercial. We will rely on our ability to predict and collect along the lines of our collection curve estimates when we invest, which we have a very long track record on, but we will continue to be disciplined.

I have a quick question. When you put your business model on the Chapter 11 filing for 2025 onwards.

If you look at your first half results this year, it looks like you need to -- in the second half, you need to increase your revenue and EBITDA by like 25%, 30% -- is it achievable? Or do you need to basically adjust your business model going forward, the business plans going forward?

Yes. No problem.

Thank you for the question. The second half of the year and particularly the fourth quarter is the strongest quarter of the year.

The second quarter is the second strongest quarter. And then there's the first and the third, which the first is the -- sorry, the third quarter is the weakest quarter.

So when you look at the second half, we do have higher ambition. Historically, we've always performed in the second half.

All you have to do is look at the EBIT chart that was on Johan's page in his presentation that shows over the last 3 years, quarter-on-quarter and annually, we've dramatically improved our EBIT, and we suspect that trend will continue in the second half.

And I mean, if you refer to the indoor plan, which I think you are, which was published last year, I mean, if you look at the results now, we basically deliver on the bottom line, but the composition of the P&L looks different. But so far, we've been able to compensate the income decay on the cost line.

And we expect that, that will continue going into Q3 and Q4. But as we also said, we're now reemphasizing a lot on the top line.

I just have a quick question on the RCF. It seems that the RCF was drawn at SEK 10.5 billion at the end of June.

Could you please give us a more up-to-date number? What is the RCF drawing as of today?

Sorry, but we will publish this when we publish our Q3 results. I think we have just published Q2.

So that's not a number that we will disclose.

Thank you very much, and thank you to everyone for listening, for providing your questions and also for accompanying us on this journey. It was a very important quarter for the last quarter, not only in terms of delivery of business results, but also closing the recap and continuing to look forward in terms of technological development and business development.

We look forward to interacting with you in the quarters to come. And I hope everyone gets some time off and some rest during the summer.

Thank you.