VEF AB (Publ)

Super. Thank you very much, operator, and good morning, good afternoon, everybody, and thanks for joining us in our First Quarter '26 Results Call and Presentation.

As per usual, I have my colleague and CIO, Alexis Koumoudos, with me, and we'll spend the next 15, 20 minutes just running through all the events and key numbers and parts that made up the quarter for VEF as was. And all the details are online as well from a presentation point of view, and that will be available as well after this call.

And the key events of the quarter, looking at Slide #2, and I think bigger picture, we're all very cognizant and aware of the geopolitical-driven volatility, the world that we're living in, the first order effect, the potential second order effects. We're not going to delve into all of that here because it's well documented by many people elsewhere, but we will give you a bit of a flavor of how life at VEF has been affected by that, while we marry in all the micro level delivery of the first quarter.

I think the first point is the NAV itself. Obviously, we had a bit of a headwind in Q1.

And naturally, when 30% of your portfolio is mark-to-model and you have a market sell-off. So the NAV was up 5.8% quarter-on-quarter in dollar terms, a bit less in SEK terms.

Fundamentally, portfolio is doing very well. Currencies were in our favor, but multiples on some key names drove the NAV quarter-on-quarter down.

And more specific and back to the micro level and performance, exits continue. And we had another secondary in Juspay in 1 quarter '26, and this is our Series D follow-on, $50 million at $1 billion-plus valuation, company we invested in $100 million a few years back from a total valuation point of view.

But yet again, we use the opportunity to top slice our position there and taken nearly $15 million of gross proceeds, at a healthy IRR of 34% and still having a decent stake in the company. I think most important for us and our narrative to the market is that was an exit, not at NAV plus/minus.

That was an exit above NAV. So continue to turn our NAV, our companies into dollars at the valuation that we say plus or minus.

And coming back a bit macro level, I think from an exposure point of view, we're getting a lot of questions, obviously, from the geopolitics of the world and how we are or aren't affected, even though. I think everybody is affected in some way, shape or form.

We are actually in a relatively good, and I'd say, relative macro position in terms of our exposure geographically with 80% of our portfolio plus/minus being Latin American exposure, which is a relatively safe haven part of the world. And Brazil alone is over 50%, maybe 60% with Creditas being our key asset.

And we're obviously the commodity trade that Brazil is a bit of a safe haven status with high interest rates, commodities and just geographically well placed. We're seeing markets there rally, currency, index, et cetera.

and we're indirect and direct benefits of that exposure. And I'll get into that in the presentation.

And more micro level, back to Creditas, it's been a really good window in the last -- we've enjoyed the last 15 to 18 months of Creditas quarter-on-quarter-on-quarter, the fundamental story continues to improve in terms of accelerating growth and there's a new layers of positivity been coming into the story. Now it's more around AI-driven efficiency, you get nice operating jaws from a top line volume revenue growth and efficiency coming through.

Healthy guidance looking forward. And those kind of catalysts that everybody likes to see around raising capital, nice valuations, getting a bank license.

So it's a nice window. We're enjoying us.

They are delivering, and that's most important for us as an investment company. And then finally, a more macro again, away from geopolitics, but more in the tech side and the AI adoption.

We would kind of stayed away from overly talking about AI from a investment portfolio point of view. But I think the pace and progress of these models now has really become game changing.

All of our companies are engaging. It's gone from theory to reality.

We're enjoying seeing what they're starting to do, and some is already starting to feed through to the numbers like Creditas. And I guess we just wanted to put a marker down this quarter, and we'll be updating you as we go on this front because it's been a very exciting next wave of efficiency growth, costs, operating jaws that we can see coming through in our portfolio.

Going into the presentation proper, just a few numbers. This has all been flagged earlier on in our release, but our NAV is at $408.6 million for the quarter, up 5.8% in U.S.

dollar terms. As I said, the SEK and SEK per share is down less, because of the weakness in the local currency, and that's down minus 2.8% in the quarter.

I'll skip over Slide 4, and I'll move directly to bringing Alexis into the call and for Slides 5 to 9, where he'll talk us through valuation moves in the quarter and a little bit more about the exits that I talked about in Juspay and beyond. Alexis, over to you.

Thanks, Dave, and hi, everyone. Yes.

So as Dave mentioned, in the first quarter of '26, 70% of the portfolio is valued at latest transaction and 30% mark-to-model. Within the portfolio, as Dave mentioned as well, Juspay completed the $50 million Series D follow-on at a 16% dollar premium to the Series D of 2025, in which we took $14.6 million in secondary sold for cash, and we hold a 6.4% remaining stake priced here at the secondary price.

You'll see that the net impact from the NAV of -- is the net impact of $10.8 million markup from the up round that happened and selling $14.6 million for cash, which reduces our NAV for Juspay in the mark value by $3.8 million in the quarter. The other thing to point out on this slide on Slide 5 is Solfacil rolled off a recent transaction to mark-to-model as it completed 12 months from the transaction.

And Solfacil, Konfio and Nibo valuations under mark-to-model valuation methodology were impacted by the March sell-off in comps across tech, fintech and SaaS. And outside the impact of the comps, each of these businesses continue to deliver in line with or ahead of our business plan.

So the markdowns were purely a symptom of market moves. Getting into this in a bit more depth on Slide 6.

We show the breakdown of the dollar NAV evolution over the quarter. And you can see the biggest impact on the NAV in the quarter was really the sell-off in comps and there are multiple impact on the mark-to-model portion of the portfolio.

This impacted our NAV to the tune of $14 million and it's reflected in the valuations of the companies and the mark-to-model methodology, names like Konfio, Solfacil, and Nibo. And the -- this was offset to some extent by the portfolio performance, which had a $10 million positive impact on the NAV.

Under the latest transaction portion of the portfolio, you'll see like a negative $4 million move in this section of the portfolio. And that is purely the $10 million uplift in the Juspay valuation, offset by selling $14.6 million in Juspay.

And the corporate cash increases $10 million, that is predominantly from the proceeds of the sale of Juspay offset in part by OpEx and coupon payments in the quarter. Overall, the FX impact was neutral in the quarter.

And the net impact of all of these moves was, as Dave mentioned, the 5.8% contraction in NAV quarter-over-quarter. On Slide 7, we continue to -- we just want to reiterate that we continue to feel more and more confident in our -- in the quality of the portfolio and its ability to compound from here.

We see our portfolio growing at 25% to 30% year-on-year from a profitable base with our large late-stage top 3 holdings driving much of this on a self-sustaining basis. And we're encouraged by the deal activity we're seeing across our geographies and feel proud of our companies and their ability to continue attracting fresh capital, which drives real value growth and creates liquidity options.

And we're also proud to find opportunities to continue converting slices of our NAV to cash at or above the marks we hold them at whilst delivering benchmark returns like we did in the Juspay round. So moving to Slide 8.

We just wanted to reflect a little bit and update everybody on what Juspay is as a business, our history with the company and where we stand after this transaction. So Juspay is the leading payment orchestrator in India with a dominant market share.

Juspay powers some of the largest enterprises in India and now has a large payment infrastructure business, powering UPI apps and bank infrastructure. Juspay has also now launched an international business, and they have offices across Asia, Europe, the Middle East, U.S.

and Brazil. And by the numbers, Juspay powers over $450 billion of annualized TPV, representing about 70 million average daily transactions, and it's growing its top line in over 50% year-on-year and the business quality is high with near 0 churn over 80% gross margins and it's been profitable for over a year now.

Juspay was our first investment in India. And we made 2 -- we wrote 2 checks into the business, 1 of $13 million in early 2020 and $8.1 million in December 2021.

And since our first investment, revenues have grown over 10x and the company has raised money in rounds led by Tier 1 investors, including SoftBank, Kedaara and WestBridge. And if we include the 2 realizations of $29.4 million, our invested capital has grown from $21.1 million to $94.9 million representing a 4.5x MOIC in USD terms.

And the proceeds of our latest secondary sale, the Series D follow-on represents 6.6x MOIC and a 38% IRR in U.S. dollar terms.

As we mentioned, we retain a Board seat at Juspay post this transaction and a 6.4% stake in the business. And Juspay really operates at the bleeding edge of tech by any standards, and we continue to be very excited about the potential of the business and the path that it's on.

We believe they will be in a position to announce some more international success very soon. And we've become -- and it's become one of the strongest AI native companies across the fintech ecosystems that we've seen with a product road map to reflect that.

We're excited to continue our journey with Vimal and Sheetal into the future. On Slide 9 we just wanted to update our summary of exits of the last 18 months in a slide.

And so since November 2024, we've delivered 4 exits totaling $52 million. We continue to target opportunistically converting our NAV to cash at or above our marks to strengthen our balance sheet and improve optionality in an environment where we see plenty of opportunity.

Overall, the $52 million in exits represented by the BlackBuck IPO in sale, the Gringo sale to Corpay and the 2 Juspay partial sales to Kedaara and WestBridge, were executed at an 8% premium to the pre-transaction NAV marks on these companies. A 1.4x aggregate MOIC and 11% gross IRR over a 3.5-year holding period.

And if we include the retained stake in Juspay, the total value of these investments would represent a 2.5x MOIC and 24% gross IRR, including the unrealized gains at Juspay. And we continue to work towards more exits of a similar standard going forward.

Dave, back to you.

Thank you very much, Alexis. I mean, look, a few slides to wrap up, and then we'll open up to Q&A for anybody who wants.

But leaning on from where Alexis talked about the exit there, most notably Juspay, the most recent one. A lot of this has been about strengthening our balance sheet from a period of 2 years ago where we had a debt position.

We're long a portfolio of private EM assets, and we start making promises to the market about being focused on exits, delivering those exits close to NAV, then getting that capital in, strengthening our balance sheet, looking at our debt, start to pay that down as a priority, then looking at our equity and everything that extrapolates from there. And where we're at as of the end of Q1, approximately we're cash neutral in that we've got $25 million approximate of cash from the exit and the buildup over the last 12 to 15 months.

And our debt outstanding at current FX is about $25 million. So our capital position is in a much more, let's call it, healthy position, but work to be done.

We're still very much focused on strengthening the balance sheet. And I think capital allocation and ideology, what would I share with you today, I think what you saw last year was Capital Allocation Policy 101.

As funds came in, we paid down half our debt. We showed the market we were serious about that.

So deleveraging the balance sheet, strengthening our position. And then we nibbled at our shares and bought back a couple of percent at what are significantly low valuations, especially as we're realizing at NAV positions as we go.

At this moment in time, we're out there talking to our investors, talking to the market, we're listening and we're logical as we go. So we've got a priority.

We've got a bond falling due at year-end. We already pay that down or roll it, but that's in our focused vision.

And then after that, you have the natural hurdle of your shares trading at a deep discount, and it will be very hard for the dollar to work beyond that in the near term with incremental capital coming in. At this point, it's all theoretical because we are in a capital position we are in.

But as more capital comes in, we'll start to shape this out and give the market more color where we think. But the bonds, our own shares is definitely where our head space is.

It's where our head space was last year, that's how we acted. So just by our actions as we go.

Moving back to a macro level. I talked about this at the start, but I saw the slide of our exposure as an investment company.

And geographically, we are exposed heavily to Latin America and then India with some small snippets elsewhere in the emerging world. We're very cognizant.

We're not complacent of what's going on in the Middle East. We've seen this many times before.

We know there are the first order immediate effects of these things as commodity prices spike and people look at the most obvious things. But then there's second and third order depending on the longevity and the depth of this situation as it feeds into global macro inflation, interest rates from a holistic point of view, but also on individual markets.

I guess what we can say today being close to our countries and our company, the focus is that we're in a relatively good position, and it's all relative in the world that we live in. But Latin America is a strong point and Brazil specifically.

It is a size commodity-producing country, both food and hard and soft commodities. It is benefiting, obviously, from the spike as well insulated from a lot of the issues given the geography.

What we've seen is the Bovespa being one of the most impressive or best-performing markets year-to-date. Also the BRL, the local currency, I think as of today, it's about 10% versus U.S.

dollar year-to-date. And I was just reading about BlackRock, Brazilian ETFs are seeing record inflows.

So some of these are read across from what we are in exposure that we have, but some of them are actually fundamental as in the BRL. We are directly exposed by Creditas, Solfacil and Nibo and to the local currency.

It's a nice tailwind for what we do. And we're not a macro fund, but we do take the macro benefits when they come.

So we're well situated at this time. We're watchful of countries like India who are net importers of commodities.

But through the prism of all our companies, we see no issues to share with you to date. We have some small exposure in the Middle East via Abhi, mainly a Pakistani company, a small growing part of the business with no issues today.

And so I think geography, geopolitics, we feel well positioned. We are watchful, and we will continue to share as we go.

And getting on to Creditas on a micro level, so we're talking back and forth between macro and micro because it's that kind of quarter. But what you're seeing at Creditas is, as I said at the start, we're liking the compounding nature quarter-on-quarter-on-quarter of both news flow and performance.

I think the loan portfolio year-on-year growth, we started talking about this early last year, how it's starting to accelerate, but nothing is real until you see it. And you're seeing the acceleration of the loan book near 20% year-on-year as of Q4.

I expect that to continue into Q1. That feeds into revenue growth.

And probably as exciting, something that we didn't predict when we start talking about Creditas, return to growth status back at the start of 2025 was the efficiency drive and the second order benefits we're now seeing from AI and it is becoming an AI-first or native company when it comes to a lot of parts of its business, and that's really driving elements like the CAC falling, and we're seeing more growth versus cost, revenue growth should exceed cost. There's a lot of positive starting to feed in there, which we'll get into gradually over time.

We share some metrics here around origination growth being 2x versus the percentage growth in OpEx, which is very nice to see. And just on AI, what I'd say here is we're kind of putting a flag down this quarter.

We're starting to share on AI. Alexis talked about Juspay and its initiatives.

I'm seeing it personally through Creditas really around the CAC, the customer acquisition cost, which was running at 20% of originations only a few years ago, it's now fallen below 10%, so record low levels. A lot of what they're doing is around collateral underwriting, their go-to-market customer service, fraud, you've seen the same in Konfio in Mexico.

But where these things become real and where we can start sharing and get excited and get you excited is when they start to hit the numbers. So the CAC is one example that Creditas shares openly with the market.

The operational efficiency, where we've got 2x growth in originations and only 25% of OpEx in the last 2 years. And finally, the headcount, which peaked at over 4,000 is now below 2,000 and moving.

So there's a lot of nice trends here -- excuse me one second. Yes, a lot of nice underlying trends that we're seeing from the AI-driven efficiency drive.

And this goes well beyond the top 3 companies in our portfolio. And then moving to the last slide, Slide 14.

Just to wrap up, what would I say, very similar to what we've said in previous quarters with some tweaks. We like to be consistent and evolve our messaging, nothing too dramatic.

But it always comes back to portfolio. We're very happy with our portfolio.

It's a very focused portfolio. Cash flow profiles are very positive there, getting to that neutral position and then moving into positivity, growing again.

We want growth in this environment. Efficiency drives are kicking in some names.

We get nice jaws starting to evolve it early and raising fresh capital, as Alexis said, new marks for Juspay, for Creditas, best-in-class companies raise capital inside in these markets. And I think the exit is something that you're going to hear from us again and again and again, because we're very happy and proud of the fact that we're delivering them.

They're hard. We're delivering them at the right price.

And then you build that cash pile, you strengthen your balance sheet and then it's what you do with it. I think so far, our experience has been around focusing on debt and looking at our shares and looking forward.

I don't see that being too much different. It's just a matter of which we prioritize and when with what cash balance that comes at us and watch this space, we will be communicating, but we get what we should be doing.

We're listening to the market. It's obvious.

And finally, pipeline, I think this is a long-term story at VEF that continues. We are well situated in the world of emerging market fintech, well connected.

We're seeing a lot of good companies that we would like our and your capital in. There will be a time for that, and we're positioning ourselves for that always.

And so I'll stop there and very happy to open up for questions from the floor.

I hope you're good. Starting with a question on Creditas.

And anything you can say about the growth outlook. I mean, Sergio talks about accelerating to over 25% this year.

And I think you wrote 25% to 30% plus in your presentation today. How much of, say, blue sky scenario is this?

Or rather, how should investors think about the visibility on this number? What are the main moving parts on the revenue side?

Yes. Linus, thanks for the question.

And it was good, we have Sergio in Stockholm. It's good to have him out there meeting people like yourselves and telling the story.

He does talk a range in fairness to them, 25% to 30%. I think 25% is a level he would think he can achieve and 30% is the level that he wants to aspire to in the current environment.

I think you'd rather do multiple years of compounding at these levels, not speaking for him, but just getting the read from him as opposed to accelerating to 50% to 100% growth given what they did in the past and burning to get there. We'd rather do it on a cash-neutral basis and nice sustainable, because that obviously feeds into an IPO narrative where you've got compounding growth that seems logical and forecastable to the market as opposed to highs and lows in those trends.

So I think that's the way he's thinking. And I think if you look at the year-on-year growth of the loan book into Q4, what, 19%, 20% and just keep on moving up quarter-on-quarter through the year, you can see 20% plus in Q1, I'd like to think we'll see and how that extrapolates.

I think the caveat here, Linus, are everybody is going to caveat everything with global geopolitics and macro. And if that turns or changes, it could change everything everywhere.

That's just one caveat that's natural. The other is around Brazil and interest rates staying high.

We had our first 25 bps rate cut earlier this year. We're hoping for more, but I understand why the Central Bank of Brazil held a little bit higher for longer, given what's happening in the world and the risks to inflation.

And then in Q4 in Brazil, we have elections, which are always interesting to say the least, the far left and far right going off against each other, which is the natural order of play. So it can get a bit noisy and nuanced in Q3 into Q4, things may slow down before they pick up again.

So there's a few caveats here and there. But given everything we and he sees through the business, I think he's confident enough to go out with those numbers and he wouldn't say them unless he think he could achieve them.

That's good color. And then, I just wanted to ask on with Creditas and Juspay now at latest transactions, I guess, Konfio will be key here in the next coming quarters and the sort of 2026 story.

Could you just double-click a bit on operations and how you think about the outlook for this year in Konfio?

Yes, that's fair. Like I think there's many ways of looking at the first part, what you said, there's many ways of looking at our -- what's important and what's key for this year.

And obviously, for us, the performance of Creditas, Juspay, Konfio, and then Nibo is all key. But we're less likely to see a markup in Creditas or Juspay given that they just raised even though one never knows.

So Konfio, I think, is where you're leaning on in that regard in terms of mark-to-model or a raising capital. But to answer your question specifically on Konfio, it is business-as-usual.

They are also accelerating growth like Creditas. They didn't reach the 20% highs that Creditas got to from a near no growth at the start of last year.

I think Konfio from memory, got 15%, 16% year-on-year growth. But they would be in a similar trajectory or aspirational category to Creditas in terms of growing the loan book in that 20% to 30% in 2026.

And margins are healthy, and they are cash flow positive on the bottom line. So they're building a bit of cash.

So it's nicely self-sustaining. We always allude to the bank license, which is an ongoing process.

And we like the fact that they've been given out in Brazil or Mexico to many aspiring entities. We like the fact that Konfio is towards the top of the list, but it's very hard to put a mark on when it happens.

But the underlying business is in rude health. And I'd say it's just tracking Creditas, but maybe 3, 6 months behind in terms of getting to that growth level.

I hope you are well. Just a question on the balance sheet.

I see now that at the recent transaction, you are close to have a neutral situation in the net debt maybe your 1 exit away from, yes, being able to be deploying capital again. But just hypothetically, if you were to do another exit, how would you prioritize the capital that you would gain?

Yes. Stefan, it's -- yes, look, there's different ways that we can deploy capital right now and let's be honest, I'd like to get rid of the debt.

And I think that's the most obvious thing we shouldn't be funding long-term, long-duration private assets and emerging markets with short duration sector. It serves as purpose, and we're very happy and proud of the Swedish market supporting us with the debt.

But we're down to a manageable level that we'd rather pay off, and we don't want our need, I think we may to do that market again in the future. But -- so I would edge towards the prior prioritization of that.

And given the small amount of debt that it is, it's very hard to pay down some, but not all. You got to roll it all or you pay it off.

So I think it's a little bit binary. So we had a decent other exit probably that, but I don't give me 100% on that.

And then you look at your own shares. It does hurt us.

We are shareholders. We work very hard for this company.

We see how our portfolio is doing. We report everything we see to the market.

We get exits at NAV in the market is what it is. But the market isn't going to reward our shares with that delivery and those exits at NAV plus/minus, we'll just do it ourselves, buy back our shares all day.

So it's very hard to look beyond your shares. So -- the easier to answer in a normal world where I had all the choices you do a bit of both.

But given how that markets work, it's probably lean into your debt clearing it before you start to eat away at your shares.

Perfect. And regarding exits, how are you thinking strategically on portfolio concentration, like we have seen you exit a few of your smaller holdings concentrating into the top holdings.

Is that the way forward? Or are you also looking to maybe decrease the size of the exposure for Creditas that is over 50% now?

Yes. There's a little bit of strategy here, and there's a little bit of the markets give you what they give you as you try and do a lot of things at the same time.

But strategically, we are definitely trying to shrink and focus the portfolio. We don't have a small amount of winning names.

That's good for us from the opportunity cost over time, and it's good for communicating to the market. Within that, I don't mind, I'm very comfortable with concentration.

Once concentration is on quality, where I believe it is today, so that makes me sleep well at night. And we'll continue to try and clean up or exit position some smaller names for sure.

And then on the top names, they're just constant work streams where we may have done 2 exits from Juspay in the last 12 months, but they could have easily been Konfio or Creditas or other names, had the market and the opportunity being there at the time. So these are work streams across a number of names that are leading us to a smaller number of holdings, a more concentrated quality portfolio and what excess capital that comes in being delivered to deleverage the balance sheet and buy back our shares at these beautiful levels.

Yes. Thanks, Andre, and thank you, everybody, as always, for joining us on this call.

Very happy with what we're seeing at VEF irrespective of what is a very noisy and volatile world. We will continue to deliver and focus on all the right things, and we'll continue to listen to our investors and our partners as we go.

And looking forward to talking to you again next quarter. Thank you.