Intrum : Report Q122 Eng

Interim report

First quarter, 2022

• • Continued strong delivery in seasonally softer first quarter

• • No direct impact from the war in Ukraine

• • Current macro challenges expected to further drive demand for Intrum services

• • All segments positively contributing to 10 per cent cash reve-nues growth compared to first quarter 2021

• • Continued improvement of new inflows in Credit Management Services

• • Strong performance in Strategic Markets and Portfolio Investments

• • In the first quarter cash EBIT increased to SEK 1,409 M (1,365), cash RoIC decreased to 7.7 per cent (7.8) and cash earnings per share (cash EPS) decreased to SEK 4.58 (5.68)

• • Cash EBIT for Credit Management Services decreased to SEK 314 M (396) and the adjusted operating margin decreased to 18 per cent (22). The segment cash RoIC for the quarter was 6.6 per cent (8.4)

• • Cash EBIT for Strategic Markets increased to SEK 728 M (645) and the adjusted operating margin increased to 32 per cent (31). The segment cash RoIC for the quarter was 19.8 per cent (16.4)

• • Cash EBIT for Portfolio Investments increased to SEK 942 M (830), cash RoIC was 9.6 per cent (9.6) and total portfolio investments for the quarter amounted to SEK 1,784 M (1,739)

First quarter, 2022

Total portfolio investments made Carrying value of portfolio investmentsAdjusted revenues Operating earnings (EBIT) Adjusted operating earnings (EBIT) Earnings per share, SEK

Adjusted earnings per share, SEK

Cash EBITDA

Cash EBIT Cash EPS, SEK Cash RoIC, %

Net debt/RTM cash EBITDA, x

Cash EBIT: Credit Management Services Cash EBIT: Strategic Markets

Cash EBIT: Portfolio Investments

Adjusted return on portfolio investments, (ROI), %

SEK M, unless otherwise indicated	Jan-Mar 2022	Jan-Mar 2021 Change % 2022 2021
Revenues Adjusted revenues Operating earnings (EBIT) Adjusted operating earnings (EBIT) Earnings per share, SEK Adjusted earnings per share, SEK Cash EBITDA Cash EBIT Cash EPS, SEK Cash RoIC, % Net debt/RTM cash EBITDA, x Cash EBIT: Credit Management Services Cash EBIT: Strategic Markets Cash EBIT: Portfolio InvestmentsTotal portfolio investments made Carrying value of portfolio investments Adjusted return on portfolio investments, (ROI), %	4,478 4,471 1,323 1,471 4.57 5.34 3,035 1,409 4.58 7.7 314 728 942 1,784 39,113 13	4,200 7 18,067 17,789 4,198 7 17,929 17,656 1,531 -14 6,267 6,475 1,532 -4 6,952 7,014 6.06 -25 24.40 25.88 6.06 2,712 1,365 5.68 7.8 -12 12 3 -19 -0.1 ppt 28.14 28.86 12,633 12,310 6,387 6,343 27.89 28.98 8.9 8.9 3.8 3.9 396 645 830 -21 13 13 1,558 1,640 3,092 3,009 3,674 3,561 1,739 35,104 14 3 12 -1.1 ppt 8,151 8,106 39,113 38,231 14 14

First quarterRolling 12 monthsFull year

Comment by the President and CEO

Strong delivery in seasonally slower quarter

During the first quarter we continued to deliver on our two stra-tegic objectives - transformation and organic growth. Despite a seasonally slower quarter, I am very pleased with the continued strong organic growth, resulting in 10 per cent increase in cash rev-enues and 12 per cent increase in cash EBITDA compared to the same period last year. The strong cash flow generation contrib-uted to reducing our leverage ratio to 3.8 times. I am also satisfied to see that all three segments positively contributed to cash reve-nues growth and, in particular, that our servicing segments are now on an accelerating growth trajectory. We see a high and increas-ing level of business activity across all segments and across all mar-kets, which supports our organic growth ambition going forward.

At the same time, we are witnessing the most serious humani-tarian crisis in decades - the war in Ukraine. Alongside many oth-ers, Intrum has donated towards UNHCR's refugee relief efforts. While Intrum does not have any business or operations in Ukraine or Russia, and the direct business consequences for Intrum are immaterial, the economic impact on the European economy may indirectly affect our business.

This war represents the second significant exogenous shock to the European economy in two years, with immediate conse-quences such as a spike in inflation driven by high energy and food costs. Combined with lingering pandemic effects on supply chains, this has caused the outlook for the European economy to deteriorate and interest rates to rise. As consumer affordability is being eroded, combined with increased credit utilisation, we see our clients preparing for increased late payment volumes.

A new macro climate will drive demand for Intrum services

In March 2022 the EU Economic Sentiment Indicator dropped substantially, mainly driven by sharply lowered consumer confi-dence. At the same time, the ECB's Bank Lending Survey indicates a significant increase in demand for consumer credit. Looking at household savings, Eurostat data shows that the savings ratio has reverted to close to pre-pandemic levels. At the same time the household investment rate has significantly increased. Overall a higher cost of living, combined with decreasing pandemic buf-fers, has resulted in a growing utilisation of credit.

While this is not yet visible in bank's non-performing loan ratios, currently at 2 per cent, Stage 2 loans now stand at just over 9 per cent, and increasing. Furthermore, the European Banking Author-ity indicates that, given prevailing uncertainties, banks should be prepared to cope with asset quality deterioration - with the asso-ciated increasing demand for our services.

ONE Intrum transformation remains fully on track

The ONE Intrum transformation continued at full speed in the first quarter. I am very proud with the progress across all initia-tives, particularly our ability to continuously increase volumes benefitting from our global footprint. Our global front offices are now serving 16 Intrum markets and 17 per cent of all calls. The new global operating platform is our largest collection system with 8 million cases, equaling 20 per cent of all cases. We have now also successfully completed our first migration of secured cases in Greece. Additionally, we recently migrated our first cases from Sweden with five more countries expected to migrate volumes to the platform during this year.

I am very excited about the potential to apply advanced analyt-ics and automation technology to our core operating processes and systems. We remain on track to deliver SEK 1 billion of recur-ring benefits by end of 2023 and can already now see how our technology roadmap can bring substantial further benefits and savings above our stated targets as we continue into 2024 and beyond.

Steady progress in Credit Management Services

During the quarter Credit Management Services saw continued improvement in business conditions. We observed increasing new case inflows, with utilities claims significantly up compared to the same period last year. Commercially, the first quarter was very strong with new sales exceeding our ambitious target. This includes the signing of Sainsbury's Bank in the UK and other size-able new deals across multiple geographies in addition to a large number of important renewals with existing clients.

Cash revenues increased by 2 percent to SEK 1,054 million com-pared to the same quarter last year. Operating expenses increased

"We see a high and increasing level of business activity across all three segments and across all markets which supports our organic growth ambition going forward. "

compared to the same quarter last year due to the FX development as well as other external spend which will start generating incremen-tal revenues during the coming quarters. Underlying cost trajectory is on track as evidenced by the significant improvement in our FTE cost-to-collect ratio of 0.8 ppt compared to the first quarter of 2021.

Strategic Markets on solid growth trajectory

While the first quarter was seasonally slower, following a very strong finish to 2021, Italy, Greece and Spain continued to deliver strong underlying performance. Furthermore, we continued to see a strong improvement in the earnings quality as significant transactional reve-nues in the first quarter last year were replaced by asset based recur-ring revenues this quarter. In Italy, our franchise has made significant progress and is now on track to deliver market-leading performance across all asset classes. This is also reflected in increased client activ-ity, including capturing new and extending existing mandates from flagship international investors such as SPF Investment Management and CRC. 60 per cent of our Italian assets under management now relate to parties other than our partner Intesa Sanpaolo.

In Spain, the impact from the loss of the contract with Sareb will negatively impact revenues later this year. However, it will be immaterial from a profit point of view, thus improving margins. The positive growth we are currently experiencing in Spain will continue to support the profit generation in the segment. Cash revenues came in 5 per cent above the first quarter of 2021 at SEK 1,418 million, with the continued margin improvement demon-strating the scalability of our platform.

Portfolio Investments continue to perform strongly

Our highly diversified book continues to generate attractive returns with minimal volatility.

In the first quarter the collection performance was 110 per cent rel-ative to the active forecast, with a cash return on invested capital of 9.6 per cent. During the quarter we collected SEK 3,145 million, up 15 per cent compared to the same quarter last year. We also invested SEK 1,784 million at fairly stable expected return levels. Cash EBITDA for the segment was SEK 2,486 million, up 19 per cent compared to the first quarter 2021. Performance and deployment are in line with the expected contribution from Portfolio Investments towards self-funded organic growth as well as financial targets.

Continued progress in our sustainability efforts

Sustainability remains an important priority at Intrum and it is very pleasing to see that we are making good progress in rela-tion to our targets. For the third year in a row, we have managedto reduce our greenhouse gas emissions. Intrum's client satisfac-tion index as well as employee engagement index have improved from 75 to 77 and from 79 to 80 in comparison to 2020, both at historically high levels. The female representation in the Board of Directors has also improved and we continue to focus on diver-sity and inclusion. Further details can be found in our recently published Annual & Sustainability Report for 2021. During the first quarter, we also developed a new Global Sustainability Policy to further clarify the governance, responsibilities and expectations throughout the business and in relation to key stakeholders.

Organic growth delivery and realising transformation benefits I am excited to see the organic growth we are delivering with continued improvement in Credit Management Services, strong momentum in Strategic Markets, and continued outstanding exe-cution in Portfolio Investments. Approaching the halfway point of our ONE Intrum transformation, our vision is now starting to translate into visible long-term benefits for our clients, our cus-tomers, and our employees. We will deliver SEK 1 billion of recur-ring savings by the end of 2023, with even more potential in the years beyond, based on a foundation of being simple, scalable, digital, relevant, and growing.

Looking at the near term, as we are entering the seasonally strong second quarter, our servicing segments are expected to demonstrate continued acceleration in their growth trajectories. Credit Management Services in particular is expected to benefit from continued growth in new-case inflows, conversion of already signed contracts as well as the generally increasing demand for our services. In Portfolio Investments we see a growing supply of portfolios, supporting our ability to select attractive investment opportunities across our wide local origination network, while upholding strict pricing discipline. The back book performance is expected to remain strong, despite the macro challenges, sup-ported by sustainably sized granular payment plans.

I expect performance for 2022 in line with financial targets - cash EPS growth of 10 per cent or above and a leverage ratio at or below 3.5 times. My two key priorities for the coming quarters remain: delivering on ONE Intrum and organic growth.

Stockholm, April 2022

Anders Engdahl President & CEO

"I am very excited about the potential to apply advanced analytics and automation technology to our core operating processes and systems."

Group overview

Development during the first quarter

Revenues and operating earnings

Total revenues for the quarter increased 7 per cent to SEK 4,478 M (4,200), with organic growth accounting for 2 per cent, revalu-ations for less than 1 per cent and currency effects for 4 per cent compared to the first quarter of the preceding year. The share of revenues denominated in EUR amounted to 66 per cent (63).

Operating earnings (EBIT) for the quarter amounted to SEK 1,323 M (1,531), with items affecting comparability of SEK -148 M (-1). The adjusted operating earnings, excluding items affecting comparability, decreased to SEK 1,471 M (1,532).

Items affecting comparability

Operating earnings for the quarter included items affecting com-parability of SEK -148 M (-1). Portfolio revaluations amounted to SEK 7 M, items affecting comparability attributable to joint ventures to SEK -0 M, items affecting comparability deprecia-tion and amortisations to SEK -22 M, transformation program to SEK -122 M and other items affecting comparability to SEK -11 M.

Net financial items

Net financial items for the quarter amounted to SEK -525 M (-516). Net interest amounted to SEK -474 M (-439), interest cost on leas-ing liabilites to SEK -9 M (-9), exchange rate differences to SEK 2 M (2) and other financial items to SEK -44 M (-70).

Earnings for the period and taxes

The tax expense for the quarter was SEK 175 M, representing 22 per cent of earnings before tax. The Group's assessment is that the tax expense will, over the next few years, be around 20-25 per cent of earnings before tax for each year, excluding the out-come of any tax disputes.

Net earnings for the quarter amounted to SEK 622 M (787), cor-responding to earnings per share of SEK 4.57 (6.06) before dilu-tion and SEK 4.58 (6.06) after dilution.

Cash flow and investments

Cash revenues increased to SEK 5,792 M (5,249). Cash EBITDA and cash EBIT increased to SEK 3,035 M (2,712) and SEK 1,409 M (1,365), respectively. Cash EPS for the quarter amounted to SEK 4.58 per share (5.68). This corresponds to a cash return on invested capital (cash RoIC) of 7.7 per cent (7.8) for the quarter.

Assets and financing

Total assets at the end of the quarter amounted to SEK 90,027 M, compared to SEK 83,189 M at the end of the first quar-ter of the preceding year. Net debt amounted to SEK 47,806 M (47,367), the share of fixed rate debt amounts to 75 per cent of net debt and is principally composed of EUR bonds with maturi-ties between 2024 and 2027. Net debt in relation to the RTM cash EBITDA stands at 3.8x compared to 4.1x at the end of the first quarter 2021. By the end of the first quarter, Intrum had SEK 3,365 M (3,166) outstanding commercial paper, the increase reflects a more positive short term credit sentiment and the proceeds have been used to repay drawings under the revolving credit facility. At the end of the quarter SEK 4,316 M (1,667) of Intrum's revolving credit facility was utilised.

Cash revenues, SEK M

Cash revenues rolling 12 months, SEK MCash EBIT, SEK M

Cash EBIT rolling 12 months, SEK MCash RoIC, %

Cash RoIC rolling 12 months, %

Net Debt/RTM cash EBITDA

Segment overview

Credit Management Services, Strategic Markets and Portfolio Investments

Key figures, Q1 2022

Credit Management	Strategic	Portfolio	Group
SEK M	Services	Markets	Investments	items	Group
Cash revenues	1,054	1,418	3,320	-	5,792
Reported segment earnings	264	427	1,293	-660	1,323
Items affecting comparability	12	55	-3	84	148
Adjusted segment earnings	276	482	1,290	-576	1,471
Depreciation and amortisation	47	248	2	93	390
EBITDA	311	675	1,295	-568	1,713
Portfolio amortisation	-	-	1,233	-	1,233
Adjustment earnings from joint ventures	-	-	-126	-	-126
Adjustment cash flow from joint ventures	-	-	88	-	88
Items affecting comparability	12	64	-3	53	127
Cash EBITDA	324	739	2,487	-515	3,035
Replenishment capex	-	-	-1,545	-	-1,545
Other capex	-9	-11	-	-60	-81
Cash EBIT	314	728	942	-575	1,409
Cash financial items	-640
Cash tax normalised	-215
Recurring consolidated cash earnings	554
Average number of shares outstanding	121
Cash EPS, SEK	4.58
Average invested capital	19,078	14,719	39,289	213	73,299
Cash RoIC, %	6.6	19.8	9.6	-	7.7
Revenues	1,574	1,517	2,006	-619	4,478
Items affecting comparability	-	-	-7	-	-7
Adjusted revenues	1,574	1,517	1,999	-619	4,471
Reported segment earnings	264	427	1,293	-660	1,323
Depreciation and amortisation	47	248	2	93	390
Items affecting comparability	12	64	-3	53	127
Adjusted EBITDA	324	739	1,292	-515	1,839
Adjusted depreciation and amortisation	-48	-257	-2	-61	-368
Adjusted segment earnings	276	482	1,290	-576	1,471