Vef (Stockholm:VEFAB) Q3 2026 Earnings Call

0:00 Good day and thank you for standing by. Welcome to the WAF third quarter 2026 earnings conference call and webcast. At this time all participants are in listen only mode. After the speaker's presentation there will be the question and answer session. To ask a question during the session you need to press star 1 1 on your telephone keypad. You will not hear an automatic message advising your hand is raised. To withdraw a question please press star 1 and 1 again. Please be advised that this conference is being recorded. I would now like to hand the conference over to our speaker today, David Nangle. Theo, please go ahead.

0:33 Yeah, thanks, Naja. Good morning from New York, everybody, and good afternoon to all our followers in European time zone. And welcome to our Q3 results conference call. I'm joined, as always, by our CIO, Alexis Koumoudos, and we'll spend the next 20 to 30 minutes running you through the highlights of the quarter, as well as taking all the questions that you have. Moving on to slide two of the webcast and the slide deck that's available online. Key events of the quarter. I put four key events here and these lie below the headline NAV which is Flattish for the quarter and Flattish year to date. And it really gets into the portfolio and then capital allocation. One, Creditas, obviously our biggest holding. It continues to compound and compounding at an increased velocity We're now doing 26% year on year on the loan growth side and 30% year on year on the revenue growth side. And then below the top line, we're getting, you know, a nice level of AI led operational efficiency and it's becoming increasingly predictable, more moving from venture capital to private equity. And then on that path towards public equity and an IPO, um, point two isn't high level on a macro level.

1:43 Clearly the Brazil election is in full swing. I left the news and noise around. We did have the first round a couple of weeks back with a very market-friendly outcome, and the markets reacted very positively to a right-leaning government coming in from the current left-leaning government in place with the currency rallying, rates, forward curves dropping, and underlying fintech equities and equities on large rallying. So there's fundamental and market-level positives behind these trends. The second round comes up this weekend. We'll get into that. Below the biggest holding portfolio, we like to highlight some of our smaller names or rising stars coming through, especially when they start to share more information. You know, Abbey, a company invested in five years ago, broke at $100 million of total of average run rate revenue mark, profitable, over $10 million in the UAE, and it's got an IPO process in the domestic Pakistani market, which is important for the company, which I'll double-click on.

2:44 And then from a capital allocation point of view, It was really a quarter where we reached that milestone of paying back our bonds, very grateful to our bond investors for their support, and then put in place a revolving credit facility, which is much more suitable to our needs, better size, mechanics, et cetera. So a real positive step in the whole area of capital, capital allocation, and moving from pay down debt to buying back our shares. On slide three, just the numbers themselves, not much to talk about because it's a broadly flattish quarter on quarter from a NAV, NAV per share in dollars, And in local currency SEC so I'll pass the mic to Alexis because a lot going on under the hood of that nav and for slides four and five around NAB Movements and the portfolio companies involved Alexis Thanks everyone, yeah, just double-clicking event on the evaluation approach that makes up for

3:38 Now essentially the split between mark valuations market latest transaction and mark model is relatively unchanged quarter-on-quarter 71% of the portfolio is marked at latest transaction 29% at mark model versus 70 30 in the last quarter There's one methodology refinement that we've had in the quarter, which is an Abbey, which I'll come to in a little bit Our two largest holdings continue to carry the marks of recent and plausible transactions, but credit us Which is held at the hundred eight million dollar series G Closed in December and just pay at its fifty million dollars to the follow-on which is close in January and price at our secondary sale in that round and Both marked for unchanged quarter on quarter. Both companies continue to deliver strongly post-raise.

4:37 And we've since checked both against traded comps every quarter. Within the marked model book, Confea was marked down a further $5.1 million. Two things drove that. The PAYTO, which weakened 3% against the dollar of the quarter, and the continued multiple compression across rate-sensitive FinTech comps that drove the peer medians that we use to value Confeo. But underneath, Confeo continues to deliver in line with the plan and is reigniting growth. So as in the first half, the markdown is a function of currency and comps.

5:24 The rest of the mark-to-model book was mixed, but net positive. Solved facile, edged down a bit with, say, multiple pressure. And against that, Nebo was marked up and Abbey marked up as well, both on strong delivery. I think the one methodology refinement highlight is that as Abby has crossed its $100 million ARR and is on its path to IPO-ing the profitable Pakistan business, we have moved the valuation methodology further down the income statement as we did with others.

6:10 And that's like natural evolution of how we value businesses to incorporate a proper after-tax multiple alongside revenue multiple for Abbey. And so that takes total mark-to-model valuations reflecting a multiple below the revenue line, so 90%. Moving on to slide five. Just to take you through the nav bridge for the quarter as Dave mentioned the headline for the quarter is that the Nav was down around 1% pretty flat quarter on quarter that was driven predominantly by good photo delivery, but offset by market moves and So as you can see on the detail in this slide, within the 29% of holdings valued at mark to model, the underlying portfolio performance added $10 million in the quarter. Against that, the multiple compression across our traded comps took $10 million off.

7:23 with the pressure really concentrated in rate-sensitive fintech names. And ethics took a further $3 million off on dollar strength in the quarter. So delivery, you know, fully absorbed by the comp pressure and currency really was the difference. For 71% of the holding value of the latest transaction, with no new transactions in the quarter, these were held flat. And at the corporate level, cash was reduced $1 million, which is the ongoing off-ex and coupon payments in the quarter, with no new exit proceeds, and the translation effect in the bond and asset liquidity balance is net to zero. So that gives us the net-net kind of flattish NAV in the quarter.

8:13 back to you,

8:16 Dave. Super. Thanks, Alexis. Yeah, like, well, it doesn't get too exciting at a NAV level, at least in the short term. I think what you'll see from the portfolio slides is that growth is compounding and that bodes well for NAV in the medium to longer term. At a high level, this is a slide we always share on the portfolio, you know, generally self-sustaining, which is what we want at this point in the cycle. It's gone from that early venture stage of burning and growing and getting market share to now in this more private equity the healthy growth but self-sustaining phase. That growth has really picked up across the portfolio in getting into that 20 to 30% range across key metrics for biggest names. And they're out there raising capital. In the last 12 months, you've seen credit tasks in JustPay, a couple of others in smaller names, but we expect more in the next six to 12 months within the portfolio because our portfolio is performing and that does draw in capital.

9:08 Specifically, we always have to talk about credit tasks because it is important for everything we do at this stage. And these are the charts that we like to present. This reminds me of presenting charts for Tinkoff in the past and EasyCo, those gradual up and to the right charts, which we all know, love, and want to be showing for our portfolio companies. But this is the ninth quarter in a row of sequential acceleration of growth from credit tasks. It's now a 26% portfolio growth, 30% year-on-year revenue growth. We are now starting to reach that steady state of 25%, 30% growth. I wouldn't extrapolate into the next 20 quarters. But this is something that the company promised and quarter on quarter on quarter they delivered. And it's been a joy for us to basically come out there and communicate that because it makes our life easy for our biggest holding and how well they're performing.

9:58 As important below the top line of the business is the efficiency gains. We talked about Creditas and AI and Sergio's and a couple of really cool podcasts on this that I recommend people listen to. But the headcount is disappearing. as agents take the place of people across various lines of business from customer acquisition, customer service and collections, etc. AI into fintech 1.0 companies is having a big impact on operational efficiency and we're seeing it firsthand through the prism of credit tasks. These charts speak for themselves. I expect there's more legs in these charts versus the previous ones in terms of operational efficiency leverage and that path towards profitability and beyond. And it's a very exciting, not just top line credit, but bottom line credit.

10:44 And all of these things are key to formation of a company to get towards being a public company from a private company in due course, bringing it back to macro level. We hate to get ahead of ourselves and we hate to focus on overly on macro, but you know, our portfolio is a function of country level and exposure and country level investor desire. Brazil is in a good place right now. It's election time, which means it's noisy, but the first round went towards the right, and the market reacted quite clearly as it seemed that Bolsonaro will take the presidency. The second round runoff is this weekend, and we will see clear caveat. But what the markets said to us was, you know, from a market reaction on equities, names are up 20% to 30% that are peers for our portfolio companies.

11:31 The currency jumped 5%. Clearly, we've got a BRL portfolio. nearly 60% of our portfolio is exposed to Brazil credit us solve the seal Nebo and they will benefit directly lower rates better for growth asset quality margins stronger currency better for translation better comps you can extrapolate but you know it's very clear that the Brazil trade is something that's in focus and our portfolio is exposed to it with the caveat that second round is held this weekend and then below credit us You know, every quarter we like to grab a name and to put it out there front and center. Especially when companies are sharing data, which is a private portfolio, Ab has been sharing more and more for a variety of reasons.

12:16 But the group ARR is now above $100 million. The regional in the United Arab Emirates is above $10 million from a standing start about 18 months ago. And these are numbers from a company that we invested in from a blank piece of paper, a million dollar investment, you know, five years ago into Omer Ansari and his team. As important and as exciting is that the local Pakistani business, which is a size part of the business, which is profitable and has a microfinance bank license, is IPOing or plans to IPO in the next weeks. And that's important for the domestic business, for domestic capital raising, domestic brand and customer, and for winning the Pakistani market. It's not a classic IPO at group level and cash out. It's within the group, but it's a major milestone and positive for Ab and thus for Beth.

13:02 We had to choose Abbey versus others. I could have easily put JustPay in this quarter. We're having a great run at the moment, especially on the international side, where international revenues are 20% now of overall revenue stream. So it's gone from nothing to 20%, and international is really working as it expands outside India. I could have talked about Confio, which in Q3 has really put the foot down in growth, and it's starting to come through on working capital and credit card volumes. We'll leave them for Q4 as we go. Moving away from the portfolio, I'm back to VEF, capital, capital allocation, capital ideology. I think we've been very clear with our messaging to the market on this front over the last, I don't know, three, four quarters. And I'd like to think that we message and then deliver and it goes hand in hand.

13:50 But we did pay down our bonds, the outstanding 300 million SEC of bonds in Q3. Very happy to do that. I'm very grateful to the Swedish bond markets, international bond markets, Porting us through a window where we needed capital and we have paid that down replaced it would revolve in credit facility a much more Appropriate tool for this point in our cycle. It's obviously lower level of exposure It's got better rates 450 and bit spread over sidebar versus 650 and it's a flexible drawdown structure so flexibility cost efficient lower rate and It's better in all aspects of what we do, and it's an indication of travel of where we've gone from requiring the bond markets to not requiring them, now having an evolving credit facility in place, which is better for us economically and from a business point of view. From a numbers point of view, we've got about pro forma liquidity of $11 million at this stage. Our net debt's about $4 million at this point.

14:49 The facility's $15 million, and we'll work on that basis and manage that around exits and capital position and capital needs as we go forward. In focus for us very much is the fact that we trade at a discount. We do not like this. We're very aware of it as shareholders in VEF. And I think with what we're trying to do at VEF, our portfolio performing incrementally quarter and quarter. We communicate that. We deliver exits at NAV. The capital comes in. We pay down our debt. And then what do we do next? We move on to our shares effectively. It's the most obvious you know, investment company, one-on-one playbook, not that everybody does it, but you know, we have, I'm not that you can do it all in one go. It takes time, but you do reap the rewards given everything we've seen from peers and over markets over time.

15:38 And, but the exits have totaled over $50 million in the last 18 months to two years. Um, we believe we have more over the next 12 to 18 months. We've used that to pay down 300 million SEC, $30 million of debt. Now we're in a position where incremental exits and excess capital assets will be moved towards capital return, capital return being buybacks effectively for the market. So watch this space. We're not making any formal capital allocation frameworks or capital return frameworks at this stage. We will tie that to exit and capital in and the reality at the moment as opposed to theoretically in advance. And we just dropped in a slide on Georgia Capital. We are very aware of the investment company peers in Swedish market and international, both today and over time, because we're always looking for best in class and benchmarks to learn from, replicate and benefit from effectively.

16:37 And Georgia Capital is a listed investment company in the UK, but it focuses on the Georgian market of Georgia and the former Soviet Union. And at the private equity fund effectively listed private equity fund, focused on that market across multiple sectors. They've had a great run of taking their discount five or six years ago from over 60% to that 10% to 20% range. We're very close to that company. We've done sessions with them and their CEO. The feedback in the playbook is clear about what they've done, the similarities to us, and there's clearly key differences. But we take the learnings for what they are. They had a performing portfolio. They first paid down their debt that excess capital and they bought back their stock. They kept on having a clear message. They kept on delivering on that message.

17:23 You have some nuances and differences in that. They have a big public listed company in their portfolio, something we would look to do in the future. It's been a performing asset as well, which clearly helps. But a lot of lessons from Georgia Capital and there's others which will bring to the table to show that, you know, we don't live in a vacuum. We're very open and aware of what works and doesn't work around the investment company world. And if anything, we're always going to be logical, process-driven as we look to build our NAB per share and close the discount to NAB. And then finally, just to close off on everything that we've said, it's always all about the portfolio. I say this a lot, but without a quality and performing portfolio, nothing else really matters. And our portfolio, we are very comfortable and confident in that portfolio today. The quality of it, the growth of it, and the fact that fresh capital coming into strength in it and give it fresh valuation marks.

18:16 The exits we talked about two years ago, it was empty promises and then we delivered. So now we've got traction, we've got market traction in that front. We believe we can do more. And then you start looking at what those exits can do for us. In the past, they have proven our NAV in theory in the market. They've allowed us to pay back our debt. Now looking ahead, they will allow us to buy back our shares and start to close that discount NAV and give a decent return for shareholders. And then we can move forward from there, talk about medium to longer term plans for BEF, but that's for another day. We will stop there, operator. I'm happy to open up for any questions that anybody has. Thank you, dear participants. As a reminder, if you wish to ask a question, please press star 11 on your telephone keypad and wait for your name to be announced.

19:02 To withdraw a question, please press star 11 again. Please stand by. We'll compile the Q&A roster. This will take a few moments. And now we're going to take our first question. And it comes from the line of Linus Sigurdsson from D&B Carnegie. Your line is open, please ask your question.

19:20 Thank you very much and good afternoon. We're coming up on a year since the Credit Desk fundraise, and I'm assuming we'll see a slightly updated valuation there. And we've seen the encouraging financials in H1.

19:35 can you just remind us a bit over the past year how so your forward expectations have changed incrementally for credit us and then perhaps if you could say something about how you think about the way the valuation backdrop has evolved yeah alienated in and now look it's not lost on us and it's something that we're focusing on and speaking with our order is on and you know logically it'll be in q4 it may be in q1 and it's some some state mechanics there but it's It's in the coming quarter or two quarters that we logically move from last round to mark to model. I think the mechanics which feed into this, like one, you've got your starting point of the last funding round and the valuations that fed into that, the currency at that point, the market multiples, etc. And that's a point in time 12 months ago.

20:24 But as you said, over the last 12 months, credit has been performing. Arguably, it's been performing according to plan, but it's been performing exceptionally well. The flip side of that is that the the comps and many of the comps have actually gone the other way, where multiples have actually fallen over the last 12 months for many of those fintech names. And then you move to the fact that in this Brazilian election cycle, if we had valued credit tasks just before quarter end in Q3 versus two days later, you know, there would have been a 25% swing. We did a kind of a simulation math on it, which is, I hate that volatility in something like credit tasks, which is the biggest name in our portfolio. So all in, we're not there yet in terms of our valuation. It'll either be Q4 or Q1. The underlying performance of the company is a tailwind for any valuation we come out with. Over the last 12 months, the multiples have been a headwind with the currency somewhere in between.

21:20 So that's kind of where we're at without giving any forward guidance, if that's okay.

21:27 Yeah, no, that's helpful. And then on JustPay, I recognize a lot of this. the value from these UPI fees could likely end up with the banks. Could you say anything about what kind of share, if any, would be feasible for JustPay to take in that environment?

21:44 Yeah, what I'll do is I will let Alexis speak on this because he's on the board and in the details. And we've been, we're just trying to be very cautious on something that's very top-down positive with still not a lot of micro-level detail. But Alexis, why don't you take the mic?

22:01 Yeah, yeah, just provide a bit of context, right? So for the longest time, UPI MDR has been mandated to zero. And finally, the regulator has allowed pricing and 40 basis points on larger UPI transactions. that provides a $2 billion a year revenue pool that will go to predominantly, as you mentioned, the banks on the Asian and acquiring side, and also the UPI apps. There isn't necessarily a direct benefit to those banks. They operate predominantly as a technology service provider for most of these participants.

22:51 But historically, the payment infrastructure has had to be subsidized and funded from other of these entities. Now there's a very significant revenue call that will help fund some of the infrastructure projects that JustPay provides and carries out for some of these users. You know, I think our expectation is that once this gets implemented, the pricing power of Jospain improves pretty materially. But it's hard for us to say with certainty like what the direct impact might be like anytime soon. I think the other thing to know is that initially it was planned to be implemented from the 15th of October and on the 13th of October It was decided that it would be delayed and rolled out post Diwali. We still don't have a specific date in which this would be rolled out.

23:58 I think the expectation is somewhere between Diwali or November and the beginning of the calendar year, 2027, January. But that's another kind of moving piece here that's hard for us to forecast. Okay, that's super helpful. Yeah, and they're very positive. And tailwinds for the company is just half the table certainty right now.

24:27 Understood. And then finally on Confio, I mean, two quarters in a row with clear valuation headwinds. And you mentioned reigniting growth here. Could you perhaps provide some more context on what's changing there at the moment?

24:42 Yeah, no, I think that the valuation headwinds have been a function of multiples and an FX as opposed to anything fundamental in the business. What I would say from a fundamental in the business, you know, year to day for the first half, Confio is running behind their forecasts and pointing to a stronger second half. Really with AI implementation, capital in place on the funding side and looking for the foot down on growth. So we were, you know, glass half empty in the first half. but then it flipped in Q3 to glass half full, and it really delivered on the growth profile of what they were pointed at for the full year. So not to get carried away, but basically they're starting to put a foot down on growth, kind of like what we saw credit us do three, four quarters ago.

25:28 And we're seeing it through both the working capital book and the credit card book. It's been a very strong quarter. And given the indications from management, that should roll into Q4 as well. So we're back in growth mode, and that means Confio in the 30 to 40% growth mode of seniors, maybe 25 to 40%, similar to Creditas and JustPay where it was lagging in the first half of this year. So hopefully I can give you a bit more context in Q4.

25:54 Excellent. Thank you very much.

25:56 Yeah. I'm sorry, just to wrap up on that, Linus, it's kind of like a, you know, on a portfolio level, you're just kind of hearing all these tailwinds in Creditas, JustPay, Confio, Abbey. It's quite nice for us as portfolio managers to have these things to share. It's a good time. Thank you. Dear participants, as a reminder, if you wish to ask a question, please press star 11 on your telephone keypad. And now we're going to take our next question. And the question comes from Stefan Knudsen from Red Eye. Your line is open. Please ask your question.

26:34 Afternoon, Dave and Alexis, and congrats on the underlying improvements. First up, the Brazilian election. Does it change your view on new investments in the country going forward if we have a Bolsonaro that ultimately wins next week?

26:54 Yeah, I'm in New York this week meeting investors, and there's a lot of people getting carried away with the impact of Bolsonaro on Brazil. We're trying to be level-headed, well, cautiously optimistic, given everything we've seen in emerging markets over time. But the fiscal focus of a Bolsonaro right-leaning government around government debt rates will be very market-friendly and will be very fintech-friendly in terms of growth, margins, asset quality, especially for the lenders in that market. So, yes, it would. If it is cemented this weekend, it would make us net more positive on Brazil, even though we've been in Brazil for 10 years through the governments of right and left. And there's a lot of fundamental positives. I think first and foremost, you have to look at it through the prism of the fact that we're very long Brazil and we benefit on that front.

27:45 But yes, it would make us more positive and it would make international capital more positive, which would be good for both capital into the country and in theory capital out in terms of IPOs and M&A. Very good.

27:57 Uh, and then, uh, uh, the other thing you, you were really clear about, uh, the buybacks, uh, uh, priority going forward. Uh, one thing that is missing from that piece now, obviously it's liquidity. So is there anything about how you think about potential exits where, where you, uh, would like to focus on, um, yeah. How do you view it from a strategic point of view?

28:19 Yeah, that's fair. It's not much of a buyback without cash, is it? Um, but where we're at is, I think what we've been trying to do with the markets over time is just drop breadcrumbs. Um, let them know where our mindset is, where we're going to next, where the direction of travel is. You know, we did it with exits, then we did it with debt and now we're doing it with buybacks. Um, nothing's real until we have the exit and the cash on balance sheet to do them. So hence we're not coming out with anything too deep and formal. It's just a high level ideology and direction of travel, which I think the market understands and likes. And regarding exits, I hate the pick timing of exits in our world because they're so volatile and so unforecastable, even if you are confident on different ones and when.

29:04 So, you know, what I just say is we're confident over the next 12 to 18 months we will see more continuation of exits. But we'll hold back on anything a bit deeper on capital allocation until then, if that's OK. Yeah, sure. No problem.

29:19 And then lastly from me, uh, really good case study on, on Georgia capital there. I think it's quite, uh, resembles, uh, back in the days when it used to own a large chunk of tele two, uh, for cash flows. I mean, in your situation, do you see that, uh, for example, credit can become that, that's holding for you in the future, uh, that can provide cash for, for you as a second liquidity lever?

29:47 Yeah, no, for sure. I think there's many possible futures clearly for, for Beth. And one of them is one where credit task does IPO. We exit some in the IPO, but we've got a large listed asset in the portfolio that near liquidity probably plays dividends. Um, and as an anchor and from a valuation perspective, cause it's got a public market price. And we had that one when we began with think off bank. Um, it was a great experience. I'll be, we're very happy to sell it when we did and make a great return for investors, but that's, whether we go there organically through the IPOs of Creditas, Confio, JustPay, for example, or whether we go there inorganically in time by the acquisition, potentially, of something listed. And that's beyond the short-term strategy. You can see how a listed company in the investment company's portfolio, like what you said in Sinevic in its glory days with Tele2, is a great example of what we could do.

30:42 Good.

30:43 Very clear. Thanks for the presentation today.

30:45 Super. Thanks, Devin. Thank you. Dear speakers, no further questions for today. I would like to hand the conference over to your speaker, David Nangle, for any closing remarks.

30:58 Yeah, just a quick one to say thank you very much for following us as always, your participation, your patience. I believe we're doing the right things to have a better future for all our shareholders. So watch your space. Stay close to us. Any questions, feel free to come back to us directly. And we look forward to seeing you next quarter. All the best. Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect. Have a nice day.