• EBIT Increase: 26% year-on-year and quarter-on-quarter increase.
• Servicing Margin: 30% in Q4 2024, up from 23% in the prior year.
• Collections Performance: 103% for Q4 2024 and 101% for the full year against active forecast; 110% and 111% against original forecast for the quarter and year, respectively.
• Book Size: SEK25 billion, down from approximately SEK35-36 billion a year ago.
• Investment in Quarter: Over SEK500 billion with an elevated IRR.
• Leverage Ratio: Increased to 4.5.
• Net Income: Minus SEK767 million for Q4 2024.
• Cash and Cash Equivalents: SEK2.5 billion at year-end.
• Cost Reduction: FTE reduction of 1,745 year-on-year.
• Servicing AUM Growth: From SEK1.3 trillion in 2023 to SEK1.621 trillion in 2024.
• CapEx Deployed: SEK512 million in Q4 2024.
• Interest Rate Sensitivity: Around SEK500 million.

• Warning! GuruFocus has detected 5 Warning Signs with ITJTQ.

Release Date: January 30, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Intrum AB (ITJTQ) reported a strong fourth quarter with a 26% year-on-year EBIT increase, marking the second strongest servicing quarter in five years.
• The company achieved a significant margin improvement, with a fourth-quarter margin of 30%, up from 23% the previous year.
• Collections performance exceeded forecasts, with a 103% collection rate for the quarter and 101% for the year against active forecasts.
• Intrum AB (ITJTQ) continues to invest strategically, with over SEK500 billion invested in the quarter, achieving elevated IRRs compared to historical averages.
• The company is making progress in its transformation into a technology-driven collections company, with successful rollouts of new technology initiatives in major markets.

Negative Points

• The leverage ratio increased to 4.5, higher than expected, due to structural factors and discontinued operations affecting comparables.
• Southern Europe continues to face a structural decline in assets under management, impacting business performance in the region.
• Items affecting comparability (IACs) remain a concern, with significant write-downs related to intangibles and restructuring costs.
• The company's net income remains negative, with a reported loss of SEK767 million for the quarter.
• The conversion rate in servicing declined slightly, attributed to changes in business mix and pricing optimization challenges.

Q & A Highlights

Q: Can you provide more details on the items affecting comparability in Southern Europe, particularly regarding the Spanish service contract? A: We have some service contracts where we paid an upfront fee, and one in Spain wasn't amortized in line with revenue collection. We did a catch-up write-down to better reflect the remaining revenue. Additionally, there were restructuring and integration costs, mainly in Spain, contributing to the items affecting comparability.

Q: Why have the adjusted EBIT margins in Southern Europe been more volatile in 2024 compared to previous years? A: The volatility is partly due to Greece's stabilized margins after peaking and the variability in Italy and Spain's performance. The composition of our business, especially in secured collections, which come in chunks, and joint ventures in Italy, which aren't linear, also contribute to this variability.

Q: With the shrinking book in Southern Europe, should we expect continued decline or potential top-line growth in 2025? A: Southern Europe presents a mixed picture. We expect declining assets in Greece, improved revenue in Italy due to diversification, and strong top-line growth in Spain. However, the organic decline will continue, but we aim to manage the bottom line dynamically.

Q: Can you elaborate on the expected items affecting comparability related to the restructuring process in the coming quarters? A: The restructuring involves a debt conversion with a 10% haircut, 10% equity compensation to debt holders, and process costs, including early bird consent fees. These will be reported upon transaction closure.

Q: Do you still expect to reach a leverage ratio of 3.5 times by 2026, or is it more realistic for 2027? A: We are committed to achieving a 3.5 leverage ratio by 2026. The restructuring delay impacts this, but we have no reason to change our target. Deleveraging will be more evident in the second half of this year and into next year.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.