Q2 2020 PRA Group Inc Earnings Call
Your presentation, followed by a question and answer session.
If you wish to ask that question, you will need to push the stocking for that by the number one on retail pet.
Please note that this code is being recorded.
I'd now like to hand, the conference over to Miss Darby Schoenfeld, Vice President Investor Relations for the PRM Group. Please go ahead.
Thank you.
Good afternoon, everyone and thank you for joining up with me today, our Kevin Stevenson, President and Chief Executive Officer, and Pete Graham Executive Vice President and Chief Financial Officer, We will make forward looking statements during the call which are based on management's current expectations. We assume no obligation to revise or update. These statements. We caution listeners that these forward looking for.
Shipments are subject to risks uncertainties assumptions and other factors that could cause our actual results to differ materially from our expectation.
Please refer to the earnings press release, and our SSP filings for a detailed discussion of these factors the earnings release, the slide presentation that we will use during today's call and our SEC filings can be found on the Investor Relations section of our website at www Dot p. or a group dotcom. Additionally, a replay of this call will be available shortly.
Solution and the information needed to listen if any earnings press release.
All comparisons mention today will be between Q2 2020 in Q2 2019, unless otherwise noted.
During our call we will discuss total revenues for the second quarter 2019 on an adjusted basis as well as debt to adjusted EBITDA for the 12 month ended June 30, 2020, please refer to the appendix of a slide presentation utilized during this call for a reconciliation of these non-GAAP financial measures to the most directly comparable U.S. GAAP financial measures and.
Rationale for providing them the slide presentation, including the U.S. GAAP Bracken reconciliation can be found on the Investor section.
Investor Relations section of our website I'd now like to turn the call over to Kevin Stevenson, Our President and Chief Executive Officer.
Well, thank you Darby and good evening, everyone and thank you for joining our call.
One of getting this evening, just as I did last quarter I'd like to acknowledge this pandemic is a human tragedy the likes.
Which the rule does not seem to very very long time.
As a company that was started to do the right things for the right reasons, we are extremely sensitive.
The impact is helping on everyone globally in our thoughts continue to go out all of those affected.
But the world will get through this and our economies will recover and it's a minute recovery that this positive outlook. We're sharing this evening for pure rate is largely explained.
We have a significant role to play ushering people through financial challenges.
We started this company almost 25 years ago with a singular purpose, so buying nonperforming loans and helping people recovered very professional respectful and patient way.
So today, everyone is focused on this crisis and how it impacts People's economic reality, but it's important remember the purity does not work with the average consumer.
You are banks are generally engaged with a non delinquent customer who is at risk for deterioration in financial condition, moving from performing delinquent and ultimately charge off.
We on the other hand have nothing but the full to consumers, 100% of our customer base is charged off or defaulted nonperforming or whatever term you would like to choose.
Now for nearly 30 years of experience and distressed debt I still find it sobering to think that even in good are booming economies.
Our customers are always experiencing their own downturn.
Just as impactful and it's just as important and it's just as personal to them.
Good economy, or bad economy Dot com driven.
Mortgage driven or virus driven from an economic standpoint, they are still experiencing their own downturn.
Let's move on to the second quarter specifics.
During the second quarter of 2020, I'd been truly impressed by our employees reaction.
To the challenges presented by this pandemic they've embraced a very different work environment and they seemed energized through this time.
The resilience and desire to remain connected and interactive with both their team members and management regardless of their location.
Coupled with our drive to serve our customers in our clients' needs it's been truly amazing.
They really got to job done.
With his hard work into to end determination from really engaged workforce. We have improved from the strong results. We reported in the first quarter of 2020.
So first and foremost we set a new global cash collection record.
Beating our first quarter 2020 record results.
Our global cash collections surpassed half a billion dollar mark for the first time in company history.
This was driven in part by outstanding investment year in 2019 that delivered record portfolio purchases in Europe, and one of our best years in the Americas.
As all made possible by our disciplined and long term approach to buying.
Contributing to this global record was a record cash collections in the Americas with very strong results in the U.S.
In the U.S. due to numerous circumstances consumers had additional discretionary or net excess funds. During this time.
This is evidenced by significant growth in the U.S personal savings rate as recorded in March April May and June.
This data was reported by the US Bureau of economic analysis, and the likes of which we've not seen since 1975.
Total mortgage this evening with a detailed description now the litany of actions and programs and behaviors driving this but but let me provide a quick list.
Work from home.
Lockdowns business in public area closings.
Mortgage and other loan deferrals.
Federal government actions and programs of course stay at home orders.
We discussed all of these last quarter and since then most news outlets certainly have covered them.
Over the very well.
The simple fact is that many people have a dish additional discretionary or net excess funds to spend or to save.
We provided the savings rate changes, but on the spin side of the equation I Trust. Most of you have seen this results.
We've all seen robust spending on things such as home improvement merchandise and products consumer electronics durable goods.
We're making clark down payments on cars motorcycles boats and campers.
And of course based on our data and our results one of the other things they choose the spend their money on is voluntary resolution of debt.
A very strong cash environment indeed.
Moving on.
Quarterly portfolio purchases were $164 million.
Our investment teams kept in close contact with sellers during the quarter and have worked tirelessly to answer questions address concerns and adapt quickly to a changing drover changing environment.
Our data and analytics groups work to incorporate coated related collections adjustments as well as include appropriate risk premiums into our pricing.
In Europe, as we discussed last quarter. Many sale processes were deferred until later in the year as European banks sought to understand environment.
In the US there were some delays, but most banks were business as usual.
While purchase volumes were muted during the quarter. The volume appears to be returning to normal levels in the sets the stage for opportunity in coming quarters.
We believe that some of the delayed volume could start coming to market later this year.
And indeed, we started to experience improved investing conditions across our markets, allowing us to acquire more expected revenue and net income per dollar deployed.
So you can see this if you review our twentytwenty purchase price multiples.
In those disclosures you will see the multiples of increased across all four product lines. So for example.
In Americas core at the end of the first quarter, our purchase price multiple was 1.95 times for the 2020 vintage.
And as of Q1. This 2020 vintage reflected three months of investment volume.
Then at the end of the second quarter. The 2020 vintage was 2.05 times for the full six months of investment.
Importantly, this move is not being driven by a mix shift, which can artificially impact purchase price multiples.
This rather is a positive shift in pricing.
Simply translated.
Redeployed fewer dollars in Americas core during Q2 2020 in comparison to Q2 2019, but we expect more revenue and more net income from that investment.
Moving on the Americas.
In the Americas cash collections in corn insolvency were a record $382 million.
In the U.S. cash collected per hour paid increased.
Almost 60% from the peak second quarter efficiency, which was in 2016.
Technological advances increases in digital payments training enhancements and data analytics all helped improve this metric.
Total portfolio purchases in the Americas during the quarter were $125 million.
While us sellers largely maintained their sales processes, we saw sellers in South America.
Paused portfolio sales, but we're hopeful they'll restart their sale process later this year.
On the operations front.
The us is operating at normal capacity.
With collectors in the office.
Maintaining strict social distancing and cleaning standards.
The majority of employees and support functions are still operating in a work from home status and productivity remains strong I think most of the world has experienced this productivity phenomena.
We continue to abide by the recommendations in each of the states in which we operate and worked with the leaders there to comply with mandates.
In the legal collections channel after voluntarily pausing moving new accounts in the legal process for two months.
We are largely largely returned to normal operations in June however.
While we began moving accounts in the legal eligible statuses, we're not seeking any new garnishment, where leads and we believe we are buying by any local requirements that have been issued.
Outside the U.S., we made a big push for digital in Brazil, and have seen growth in this channel and collections have begun to increase.
Moving on Europe.
Total cash collections in the quarter were $128 million, which was our third highest quarter ever.
The high into Q1 of 2020 and Q4 between 19.
We're very pleased with this result, considering many European countries had full lockdowns and some courts were close which even prevented them from remaining payments to us.
Despite this.
We grew cash collections, 1% or 6% on a currency adjusted basis, mainly driven by record portfolio purchases.
And portfolio purchases this quarter were $39 million.
From an operational perspective, just as in the US our European business is operating largely at normal capacity.
But in various stages of work from home and in office status. So one difference between Europe and the US is at the operation staff is still split between in office and work from home, but with little to no impact to productivity.
Most of the courts and billing processes returned to normal in June and July but there are some backlogs in certain countries.
I'd now like to turn call over to Pete to go through the financial results.
Thanks, Kevin.
During the second quarter, we continued the strong cash collections performance, we saw during the first quarter, particularly in the U.S.
This led to record total revenues of $272 million, an increase of $20 million or 8%, primarily due to significant overperformance versus expected collections during the quarter.
Recall that under Cecil revenue has two components first is portfolio income.
The yield component, which was $248 million.
Roughly even with the second quarter of 2019.
Second is changes and expected recoveries, which has two parts.
First as cash that we collected in the quarter compared to expected recoveries.
This amounted to $119 million in excess of expectations.
Primarily driven by significant over performance in the us, which Kevin discussed earlier.
The second part is a present value impact of any changes in future years C.
This quarter that netted to a negative $100 million.
We've assumed the majority of the over performance in the us.
There is an acceleration and timing of collections, rather than an increase to total expected collections.
We believe this an appropriate assumption given the current environment.
However, if we see sustained performance over time supporting an increase in our expectation of total collections. It will drive additional revenue in the future. Regardless. This is a positive since collecting cash earlier in the curve improves returns.
Operating expenses were $161 million for $27 million decrease from the second quarter of 2019.
Our operating expenses were significantly reduced in the second quarter due primarily to reduced levels of activity globally, particularly legal collections.
Income from operations was a record $111 million, the 76% increase compared to the second quarter of 2019.
Net income was $58 million generating $1.26 and diluted earnings per share.
Okay.
Cash collections in the quarter were a record $510 million, an increase of $40 million or 8%.
And an 11% increase on the currency adjusted basis.
Cash collections in the Americas increased $38 million.
This was driven by a 37% increase in us non legal collections, which included an over 90% increase in digital collections.
These increases were partially offset by a 4% decrease in us legal cash collections as we temporarily pause moving accounts into legal channel in April and May.
In the 21% decrease in collections and geographies outside the U.S.
Primarily due to strengthening of the U.S. dollar.
Europe cash collections during the quarter grew $2 million.
The biggest driver this growth was record portfolio purchasing in 2019.
Mostly offset by foreign exchange rates going against us.
And while we're not completely finished with consolidation of July results early indications are that the trends from the second quarter have continued into July.
Our cash efficiency ratio was 68.7% for the quarter, so dramatic improvement compared to the second quarter 2019.
This was driven by a $27 million decrease in operating expenses, while cash receipts were 8% higher.
As we indicated during the first quarter conference call. This was to be expected.
Since we temporarily pause, placing us accounts into the legal channel in courts in many of our European countries were closed we had significantly lower legal collection costs, which at $20 million were $14 million lower than the second quarter of 2019.
In the US we resumed placements in June in our in our European countries courts have opened to varying degrees. It's our current expectation that legal collection costs in the second half will return to the quarter. The quarterly levels, we have been running up prior to the shutdown.
We also saw $9 million decrease in compensation expenses, driven primarily by a decrease in the number of US collectors as we are realizing efficiencies in the call centers.
We believe this reduction in expenses likely to hold and that this quarter is materially close to where we expected to be quarterly in the second half the year.
One additional comment I'll make on expenses as mentioned the communication expenses were somewhat depressed in the quarter due to lower levels of activity.
This quarter's results contribute to an increased expectation for the cash efficiency ratio to around 62% for the full year of 22000.
Here see at the ended the quarter was $6.4 billion with 52% in us and 43% in Europe.
Year see decreased slightly from the second quarter of 2019.
The decrease was driven primarily by record cash collections in the quarter as well as the assumption that the majority of the over performance was an acceleration of future GRC, coupled with lower levels of portfolio investment, resulting from the delay in portfolio sales by some sellers.
This also contributed to us having a significant increase in cash flow from operations.
And when combined with recoveries applied to negative allowance the business generated $624 million in the first six months the year.
This brings the trailing 12 month cash generation to $1.1 billion.
Our strong cash performance during the quarter drove improvement in our leverage ratios and we ended the quarter, where the trailing 12 month debt to adjusted EBITDA of 2.1 times.
We also had capital available for portfolio purchases at the ended the quarter.
Turning to $933 million globally $630 million in the Americas and $303 million in Europe.
At the beginning of this week, we completed the retirement of our 2020 convertible notes in cash.
This reduce the capital available on the North American facility by about $250 million from you ended the quarter even.
Even with this reduction we maintain a significant amount of capital available for portfolio purchase.
In addition to this strong cash flow and significant available capital our conservative capital structure provides us with the flexibility to expand our funding capacity on favorable terms should we choose to do so in the future.
We believe we will see increased supply of Npls come to market and we have an incredible balance sheet to work with.
Now I'll turn it back over to Kevin.
Thank you Pete.
So it certainly remains to be seen what happens with the overall economic environment.
But as our clients increased loss provisioning signals, we should expect charge of volumes to increase during the first half of 2021.
As of the global financial crisis, we anticipate that a larger share of that increase volume will be sold.
Creating more supply.
That more attractive prices.
As I mentioned during the first quarter call and this evening.
A stressed economic environment is where we become more important and it's one that we prepare for.
We believe we have taken actions in the past, which position us very well for this emerging opportunity.
First our proactive engagement with all of our sellers gives us a deeper understanding of their current and future needs.
Second as Pete mentioned after repaying, our 2020 convertible notes and full.
At the beginning this week, we still have significant capital available to purchase portfolios and we're generating significant amounts of cash.
As one of the least levered players in the market.
We believe we're in a good position to raise additional funds should the opportunity be right.
We've worked hard to have a capital structure available.
Which will provide our sellers with a partner that they can trust to help them with their nonperforming loans.
Finally, we have a team that embodies the culture on which we built this company doing things the right way for the right reasons and for the long term our employees have arisen to the occasion and I am honored by their hard work and dedication.
They remain committed to treating customers with dignity in respect and providing them with flexible solutions to resolve their debts.
They also along with PR continue to be very giving towards the communities, where they live and they have supported local charities and nonprofits throughout.
And once again I urge each person and each company on this call to do the same.
As we move forward into the back half of 2020, I believe puree is in a very strong position globally.
We have been disciplined with our investments we have been disciplined in maintaining a conservative capital structure.
The result of these preparations is extremely important as we entered environment that should have increasing supply and improved pricing.
And operator, we're now ready for questions.
Thanks.
If you'd like to all state. Your question. Please press Star then one more telephone and Wakefield nine to Guineans. If you wish to cancel your increased keeps pace stall and too if you on the speakerphone. Please pick up the handset to ask your question. The first question comes from Mark Hughes of Suntrust. Please go ahead.
Thank you good afternoon.
Hey, Mark.
Pete I wonder.
When you we adjusted your assumptions after Q1.
And you pushed out your collections expectations how did the.
I think you had made point that that was.
Pretty front end loaded in the tier assumption load there'd be softness in the in the short term with a recovery how did your assumptions about stay Q3 compared to Q2 really think about.
If you're running at relatively normal collections.
What does that mean in terms of the potential over performance versus year adjusted curves.
Yeah.
Well the what we did in the first quarters, not really all that relevant to the where we sit now because we went through a full processes at the end of the second quarter to close.
What I would say about our future outlook is we're not assuming that overperformance continues into the future.
So to the extent, we continue to see elevated levels of collections, which.
As I said in my prepared remarks, July's trending is similar to what we were seeing in.
In the second quarter than than we'll have similar performance in those curves in the future.
And then.
I think some of the back is that helpful collections early on the right party contact the.
Nothing else to do with your money so to speak.
Any observation about those factors that were helpful.
Still driving the business presumably.
Yes, good question no.
And again those RPC rates continue at elevated levels. You know inbound calls are up strongly gris digital is up strongly so all the things we talked about very early in this and this period are happening or happened during Q2 and as Pete said, we're seeing same trends in July.
And then I'd like you mentioned I got on a couple of minutes late but anything about pricing or expected collections multiples for the paper that you.
Did acquire this quarter this quarter.
Yes, no I had a whole section on that.
But but I'll go through it again just didn't rough in rough terms.
If you looked at the Q1 Q and focused on America's core you would see our deal multiple at about 195, and then as you look at the Q2 America's quarter tranche.
That number is two all five.
For the six month, that's correct, so clearly that the ladder that.
I repeated its or okay repeat was on mute.
I'm terrified for the full six months, which obviously means that the second quarters multiple had to be higher to drag up to 195 and what I. Also said was that that's not a mix issue and so as you know you've been around long time.
Mix can artificially move that this is actually pricing improvements.
And Thats ahead of the because I think charge offs actual charge offs are still fairly modest as that is.
Is that fair is this just kind of positioning for.
What is likely to come in so buyers and sellers are aware of that and pending dynamic or is that the current supply demand.
I think its current supply and demand if I understood. Your question right, but it's it's yes I also talked about in my prepared comments about the amount of work our data analytics group we are doing.
Not only trying to trying to price and a co bid curve as we call it but but also a reasonable risk premium I don't think thats, an unreasonable thing to think about.
In this kind of environment.
Thank you.
Yep.
Thank you.
Next question is from like a channel JMP Securities. Please go ahead.
Good afternoon, everybody. Thanks for taking my questions questions Kevin.
Hey.
So maybe just just following up on the last.
Few questions.
Obviously, it's been an interesting earning season right I mean, all the lenders are sort of living in this.
Suspended reality, while forbearances stimulus kind of delays the eventual.
Roles of delinquencies into losses, and you seem to be benefiting from it too as you highlighted all day.
Excess household liquidity.
But I'm wondering Kevin is we think about.
[noise] sort of normalized.
Kind of that cash efficiency ratio I understand that sit unsustainably high percentage because legal.
Hit the pause button for a few months.
But but even your comp expense was down sequentially.
Despite record collections.
Can you give us a sense for.
What we are you kind of see the company exiting the year or if in your mind that theres sort of a sweet spot of spending too much or too little for the ideal amount of collections like what is the ultimate kind of optimal cash efficiency ratio.
When everything is working.
Yeah, So maybe I'll hit that first.
David This is Pete.
One of the hard things about cash efficiency ratio in this kind of an environment is with the over performance in cash depending on what assumption you make about that.
Of that can certainly skew the numbers and so thats why I think in this current sort of environment utilizing cash efficiency as a way to gauge.
<unk> expense levels is going to be a little bit difficult thats why in my prepared remarks, we tried to give a little bit more color on some of the bigger line items talked about legal expenses getting back to kind of pre shutdown levels.
I did highlight comp expenses.
I said that I think that.
Our quarter number. This this time is materially in line with what we think we're going to see in the in the next couple of quarters.
And then kind of broadly.
Theres Theres some additional items Cox communications being the biggest one of them this sort of depressed in the second quarter.
And I'd expect a little bit increased level of expenses in the other line items, but but the big items.
I think we've addressed.
Got it.
By the way our you because I know most lenders in terms of the.
Allowance rates they took it.
30 day, we're not factoring in a second stimulus package is that factored into any of your curves near term.
We have we have not made any assumption of.
Continued robustness in our collections as a result of those all the things that Kevin went through.
Got it got it.
Just one follow up maybe switching gears in terms of the debt sale.
We remain in Europe.
I mean, it's it sounds like a lot of those banks are also.
You know, providing forbearance and there's some government assistance.
In terms of kind of the pace of recovery for when eventually we do see.
Npls come to market over there.
You think it's going to coincide with credit card issuers domestically.
Start to bring more charge offs to market or or is it can be a little more of a.
Delayed recovery in volumes.
Yes, no that's a good way to phrase the question.
So you've got to you asked with all the those actions that we've all talked about and you've got the forbearance to be a bigger deal over over in Europe. So.
So I was just put it this way I think we can all agree.
That.
Coal that impact is going to generate additional mpls at least I hope we can agree to that.
I think that largely it's going to be in the first half of 21 into 21 now with the exception in Europe.
Number the banks pump the brakes pretty hard in Europe, and so I think the Dod volume that already exists today on their balance sheets, that's going to be rolled into the second half 20, so that would be the difference between I think you asked in Europe.
Got it got it okay, well listen terrific job. Thank you.
Thanks, David.
Hi.
From Eric Hagen of KBW. Please go ahead.
Hey, guys, thanks and.
Nice nice quarter.
A follow up on on Europe, as a result of the slower pace of deployments like hearing you essentially imply that.
Yes, I see might go down a little in the near term across the portfolio, but you also likely dilemma the portfolio a little bit.
But the stronger IRA new purchases domestically little essentially kind of offset that impacted slightly weaker European revenue.
As an add on to that.
I think you guys noted that the cash efficiency ratio would be around 62% for the full year.
I'm curious if you can tease apart how that.
Ratios in the U.S. versus yet.
Mark.
We haven't disclosed cash efficiency, except for on a global basis. So we can't do that for you.
And if you could could you could you.
Try to rephrase. The first part of the question again I want to make sure I understand what you're after so I can answer it.
Sure I mean, I think you guys noted this there's a slower pace and deployments in Europe.
And that significant chunk of the portfolios am I kind of hearing you imply that.
Yes, I see across the portfolio might kind of go down a little bit in the near term.
But the make up for that or what the offset that.
Well be somewhat stronger IR ours on new purchases domestically.
Yes, that's a reason yet I think it's a reasonable assumption and there are a globally Rcs went down modestly right beat yeah. I mean, it did it didnt grow at the rate that otherwise would have right and part of that as we said in my prepared remarks is.
Because we've made an assumption of acceleration on this overperformance. So that that has the effect of pulling down the DRC costs right yes.
Got it great Yeah, just wanted to clarify that and and thank you.
Hey, Kevin you noted that you expect a wave of charge offs to come to market.
As soon as next year.
Thanks.
I would disagree with that at all but in a scenario, where we do get that volume and cheaper pricing how much flexibility do you think you'll have to.
End of picking target the kind of credit.
You want in the portfolio, maybe you do pay a little bit more for that control a quality over what you are buying versus simply being a price taker and the market. If you will.
What which could still give you that.
Thanks on the generated a strong return because pricing is cheap, but you might not have the same kind of control over the credit in the portfolio itself.
So we're talking about our ability to participate in pricing and buying new deals right.
Correct or are you talking about okay. All right. So so so that's something that clearly.
I've been through for almost while 27 years actually so it's always it's always a dance right. You're always you always working with the competition and so let me let me, let me step back and talk about that if I could so just interrupt me if I'm on the wrong track because I, sometimes I'll I'll formulate an answer that doesn't answer your question I know what to do that so if you think about the.
The U.S.U.S. has a very I would call it stable and rational market still so we've got good strong competition across the United States.
And and I think that you know we are certainly competing head to head with a number of United States U.S. competitors and remember we're also competing with the banks optionality in terms of pricing placing accounts at.
A contingent fee agency. So we're always doing that dance to figure out what we can well we can pressure on and what we have to tag. So that's something we've done over and over again.
And then a little bit of price discovery right in Atlanta past few months.
Then there is Europe the thing about Europe is that.
Lenders are I mean, maybe to your point, a little bit willing to pump the breaks but they can do that so long I think and I do think it at the risk of going too far and answer. This question a lot of European competitors are under pressure to de lever.
And so if you've listened to our calls for the past few years. It really starting probably in 2016 excuse me and then heavily in 2017 2018, we talked about is irrational pricing market in Europe, and there's not a lot I can do about our in a rational competitor, but again I think with this pressure on deleveraging.
I think maybe some of the European competitors have.
Paid quite a bit too much for portfolio, especially in 16, 17, 18, I think baby potentially paid too much for M&A deals and in some of them billions of dollars a goodwill on their books I think that I guess going to rationalize the U.S. market I really do I'm sorry.
And market U.S. markets already rational I think it'll rash help rationalize the European market and.
And so those are my thoughts on it does that get close to answering your question.
I think it Doesnt mean that is really looking for.
Simon at very high supply do you have the ability to tailor the kind of credit you put in the portfolio or are you really just kind of buying less essentially coming out of.
The bank pipeline and you already Oh, Yeah, I don't want I don't want to use the word price taker, but you're right I understand what the market will give you yet so I understand so so yeah. So so we try to tailor. It you know I think I think you know any when it's been in this for the long term.
As long as we have we're trying to tailor it.
But just remember we're always competing against other other people with the checkbook and so that's some.
That's something that we're very committed to doing.
Got it thanks to the comments can appreciate it.
Yep.
Alan.
Walter Blood of Raymond James Please go ahead.
Hi, guys congratulations on the quarter <unk>.
This this might be getting that I'll, let linda and in the leads that Pete can you give us any color on when you assume presume days collection excess collections in Q2 got pulled forward can Hughes any idea of essentially come when because obviously the net effect of the cash and because.
Let me end devices, the NPV of of the adjustment.
Hey, Matt as where they came from obviously if you as the collect something this quarter you. So what you're going to get next quarter the impacts much more modest than if you thought it gives us a discount if you thought it was something that was going to happen.
Yep.
Yes, yes.
So can you give us any idea on on kind of this scale up hypothetically.
Yeah. It's the cash has a lot connection did continue which july trends seem to.
Indicated it.
At the same scale, what the whole full would then be it seems to be coming from.
Good that out and have a great 10 net impact positive.
To to close to the revenue recognition.
Yes so.
Largely I would say the the assumption around.
Pull forward is.
Back half of this year in 2021 in general, particularly.
For the U.S. portfolios, the the first quarter of 21.
But other it really just depends on.
On the vintage some of the some of the curve adjustments were longer term than that.
It's kind of hard to generalize because we look at.
We look at.
You know a byproduct by geography by vintage as we're.
As we're making these adjustments.
But in general got apps.
Yeah.
Appreciate that and then the settlement on kind of efficiency, obviously, I think that that collections.
Collect tower or whatever the up substantially again digital's continue up hole I mean, you and that's I think it was last quarter you shutting that that shuttering the call center in Las Vegas has that been.
And despite the fact that we talked about two years its head for two years or that you needed to go head count but now.
Says that they didn't get any thoughts it to lashed analyzing the headcount down.
Maybe even faster that given the how productive.
How how increased productivity is that plan now.
Okay. So that's that's a little bit different question I thought you were asked me. So that's great. Thanks.
So no I know I think we're in a good position right now in terms of FTD were at what 1400 in 30 430 collector have heads in the U.S.
They are really really productive right now, but you know again some of that's been driven by all these.
Programs and stuff that I've talked about.
So I think we all feel good about where we're out right now.
The whole discussion about why we went from 1500 3000 back to 1500, roughly as a whole different discussion about about our investment. If you guys remember the last couple of years I've been talking about investments in people data digital and and then additionally, coupled with that part of that ramp down has been about the type accounts, we've been buying since really the latter half of 20.
17, so there's a whole formula around that but.
That's that's that if we can talking about that at some time, if anybody wants to but.
Well read today, I think we feel really strong about and I don't think you're not going to see us it at 1000 wraps.
I've seen or you're probably not going to see us at 1800, a few thousand either so I think we're in a good spot right now.
Okay got it I appreciate it thank you.
HM.
Oh.
From Dominic Gabriel of Oppenheimer. Please go ahead.
Hey, everybody and thanks for taking my question you know, we think about unemployment rising Vic I would've expected that you'd see a slowdown in collections.
Yeah. This time, we're seeing them actually speeding up in some instances could you could this.
Really smoothes out this cycles collection levels versus previous cycles, and what we would expect.
Went when they had less direct stimulus and less discretionary spending in other categories.
Oh, yeah. So.
Yes, so I don't if I do smoothed out as the as is the word I mean, we have who had a spike in collections clearly and its right along that does need to the nature of your question, though to be sure and it's it's just about all the stuff that I talked about again from work from home Lockdowns business closings and all that all that stuff.
And so yes, it could have a bridging in fact, so if you think about if you think about cash going into the global financial crisis. There was this dip and that's probably what you're getting out right. There was his depth and then that was being supplemented by by portfolio is being purchased to large degree and you didn't notice it as much but here. We've got this we've got this.
Incredible ramp up and you can't people net.
Net remaining cash or or discretionary cash, which everyone at how you would call it.
Leading up to a period, where we think there'll be more more volume in a market. So I think it's up it's a good observation.
And then if we could if we could just talk about how the collections have been coming in differently over the last call. It three three to six months.
Versus a typical period is there more full payoffs coming in or people you know paying or is there.
More people paying.
Our portion of their monthly so maybe they're putting to work.
And then they usually do what's what's the split of that how does that how does that matter as we look forward as far as you know the total collections curves and and what are some of the implications of how they're spending what are you seeing as the payments are changing.
Yes, I understand I understand your question. So we don't disclose a lot of that data, but I can give you color on it for sure.
And so if you think out let's talk about payments in payment build.
Or and let's talk about settlements and full and payments in fall kind of one group.
So as you look at payment build that's definitely building, it's definitely increasing more so we're not we're not cannibalizing anyway payment streams and so that's that's great news that speaks well for the future now and then Additionally, we are seeing if you looked at payments in full and settlement for chart.
You definitely see you definitely see a move up so there are there is a significant amount of change in that.
Coupled with.
Studied increasing.
Payment plans being put on our books. So it's a it's a it's a just than it has an overall really strong.
Environment cash wise.
And then if you could and then you know what do you think the bigger factor is overall, if you had to try to put these things into its kind of a box you think it staying home. It's helped your called <unk> a collection I mean people not spending on you know there next trip and and then not paying you instead or do you think gets the stimulus how would you.
Right those two one against the other thanks so much.
[noise] and Boy you asked me for but.
Let's not let's not forget things like mortgage deferrals too I think that's the thing that you know one of the things I've been talking about now for three months or so is what we saw during the global financial crisis, and we saw people who just they they just kind of gave up on their homes and they said you know we're I'm. So underwater I can't I am I company as mortgage and they use that money to do other things with it and one of that was to pay off.
Yet so I I honestly don't know that I could pick one it didnt, hey, I think because people have all this cash and what you know because not everybody is unemployed right. So there are people that are that are still employed there are people that are unemployment, but but they are locked down and they can't just gotten spend to northern afraid to go out even if you're in a phase two or phase three.
Positioning your state so I I can't pick one and I'd be guessing, but just remember that that it's all those things I talked about working in concert.
It's almost like a perfect storm from a cash perspective.
Okay, great. Thank you very much I really appreciate.
Yep.
Yes.
Oh accused of Suntrust piece going ahead.
Yes.
Pete you had a given some thought that some of the expense items you happened to talk about.
Hey, the agency fees.
Yeah, we're in right yeah.
[noise] shoot.
Talk about them, specifically, but I mean, it yeah, yeah I just check that agent agency fees is what I was the was that.
Yeah, but if you if you think about our model you know, we try and be vertically integrated where we can and so the places where we're.
Heavily reliant on agency fees are sort of like no the south American operation to a lesser degree.
You know certain pockets in Europe.
Those were down in the.
In the in the period and you know as.
As those places start to pick back up in terms of a cash collections in those agency line will go sort of in tandem with those units.
So.
Good personnel, the so where you have a little more permanent or improvement, perhaps other line items, there should be more in line that historical norm.
Sorry say it again.
I was just summarizing for myself or seeing if you agree that the I think you made the point that personality and they get probably lower.
May be permanently because the more efficiency, but the other line items are more likely to move in and them with collections and therefore recover as.
As things open back up that a fair way to put it.
Yeah, particularly agency fees because those are contingency you know so.
There's a topline component when that when that number goes up it's because we're getting more cash that channel.
And then your interest expense and it's a pretty good level or.
[noise] any resets or anything like that as the interest rate to the decline.
We've actually we actually benefited from from the declining environment in the first first part of the year I think the thing that's been a most impactful though is the sort of over collection in the in the curves and paydown of debt.
Well I highlighted our.
Our leverage metrics.
We're really positive at the end of the into the quarter.
So less barring means less.
Plus interest costs.
The 624 million and cash flow that you shared earlier in the first path what was the year ago comparison for that number by your calculation.
I don't know that off top my head.
Good question, though.
Okay as I'm sure. It that there has taken it easy route by asking it.
Yeah. Thank you very much.
Yep.
Oh.
[noise], yes.
And then from ophthalmology tend to coltec to getting students and for closing comments.
And before I do that we did a really quick calculation on the Mark Hughes question and it was for 75, okay. Great. So hopefully you guys did on her that but I'm just want to thank everybody for joining the call.
Everybody. Please stay safe support your local charities and we look forward to speaking to you next quarter. Thank you.
Thank you.
That's cool.
Thank you for children as you may now disconnect your lines.
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