Q4 2020 PRA Group Inc Earnings Call
Good afternoon, and welcome to the PRA Group Conference call, all participants will be on listen only mode.
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Please note. This event is being recorded I would now like to turn the conference over to MS. Darby Schoenfeld, Vice President of Investor Relations.
Chris. Please go ahead.
Thank you.
Good afternoon, everyone and thank you for joining US with me today are Kevin Stevenson, President and Chief Executive Officer, and Pete Graham Executive Vice President and Chief Financial Officer.
And we'll make forward looking statements during the call, which are based on management's current beliefs projections assumptions and expectations.
We assume no obligation to revise or update these statements and caution listeners that these forward looking statements are subject to risks uncertainties assumptions and other factors that could cause our actual results to differ materially from our expectations.
Please refer to the earnings press release, and our SEC filings for a detailed discussion of these factors the earnings release and slide presentation that we used on today's call and our SEC filings can be found on the Investor Relations section of our website at Www Dot PRA group Dot Com. Additionally, a replay of this call will be available shortly after its conclusion and the.
Information needed to listen is any earnings press release.
All comparisons mentioned today will be between the fourth quarter of 'twenty and 'twenty on the fourth quarter of 2019, unless otherwise noted.
During our call we will discuss adjusted total revenues for the fourth quarter of 2019, as well as adjusted EBITDA and debt to adjusted EBITDA for the 12 months ended December 31, 'twenty 'twenty and 'twenty and 19, please refer to the appendix of the slide presentation used during this call for a reconciliation of these non-GAAP financial measures and most directly comparable U S GAAP finance.
You'll measure the five person presentation, including the U S. GAAP reconciliation can be found on the Investor Relations section of our website and now I'd like to turn the call over to Kevin Stevenson, Our President and Chief Executive Officer.
Well, thank you Darby.
I want to begin this evening, because they have and each of our 'twenty and 'twenty conference calls and we're taking just a moment.
And so acknowledged this pandemic is a human tragedy.
So I think that was marked earlier this week as United States passed a grim milestone and.
Measured by deaths due to Covid.
We're extremely sensitive to the impact this is having on everyone globally and our thoughts go out to all of those affected either directly or indirectly like COVID-19.
And as a company that was started to do the right things for the right reasons, and where our customers and employees are valued and respected.
And what I would share some of what we're doing for our customers and employees during this difficult time.
Before I talk about the changes we made in 2021 and review some of our history as it relates to customer treatment.
We've always tried to be especially sensitive to our customer situations, we often talk about our founding principles and.
And one way of demonstrating them is for patients and understanding.
Prior to Covid, we had many consumer friendly practices in place.
And the U S. For example, we do not charge interest or fees or unsecured accounts.
It's our goal to help usher our customers through their own personal difficult financial times, instead of making it worse weather difficult times, driven by Covid or some other struggled.
We seek to work with our customers on their road to financial recovery, preferring voluntary and affordable payment arrangements set up and our call center on our call centers or through our website.
And historically resorted to the legal channel when we determined that the customer has the ability to pay us, but will not engage with us or otherwise and.
And remember most of our legal collections still and both our customers, making voluntary payments in order to resolve their debt and not be a liens and garnishment.
And this year, we strengthened our commitments to our customers ensuring through communication and training and our call Center staff, we're reminded of our founding principles.
We broadened our hardship policy, allowing more flexibility when placing people into hardship status and suspending our collection activities.
Covid related or not.
And given our customers one less thing to worry about.
And the U S. We also paused moving customer accounts and the legal eligible status early and the pandemic when things were the most uncertainty.
That process has resumed and we have not sought to enforce any judgment and garnishment and nearly a year.
We stopped initiating new bank and wage garnishment back in March of 'twenty, and 'twenty and again have not resumed them.
In addition to taking care of our customers. During this difficult time for our employees are of utmost importance to us as well.
When you think about key drivers of success during 2020 and of course, many things come to mind.
And we're certainly prepared with capital and.
And we'd certainly structured the company soundly and conservatively and we had strong and tested analytics.
For more than ever and the most important factor and our success in 'twenty and 'twenty was our employees.
Without them embracing the operational changes without them, believing in our vision of how we as a company are more important than ever.
During times of economic stress and none of this would've been possible.
We recognized that simple truth early on and.
And it's a very break of this pandemic, we took many actions to make our employees lives just a little bit easier.
To share a few on this evening and there were for.
Focused on the U S as much of our operations staff remained and the office throughout the year.
So first we provided up to 80 hours a liberal leave for Covid related situations.
And then during those very concerning first few months of the pandemic, we paid our hourly employees, who are unable to work from home and additional $100 a week. So thank you.
Around mid year, we awarded and bonuses.
For those who went above and beyond to help us respond to the challenges of Covid.
For the year moved on and we increased base pay for many of our collectors and July.
For those participating in the dependent care flexible spending accounts, we supplemented their pay up to $200 per pay period. This is especially important for employees, who had school age children.
Learning virtually.
We provided free telehealth benefits for both medical and mental.
We expanded medical dental and paid time off benefits to part time employees.
Very importantly, we decided to bridge employee service or tenure for brakes are 12 months or less and in many cases COVID-19 challenges cause people to leave their jobs, but later they were able to return and this step ensured they didn't lose their tenure.
We increased our short term disability benefits as well and life insurance benefits and for.
Finally earlier this month.
We were the second bonus much like we did at mid year for those who want who went above and beyond.
Taking this time this evening to share these efforts concerning our employees and a little.
A more detailed and you might expect and I.
Do this because these are areas of our company, we don't always highlight.
But they go to the heart of who we are as a company.
We started 2020 with great momentum across the globe.
The competitive environment in Europe and shifted in our favor.
Each single and our ability to increase volume and market share.
We also saw on market trends and indicated increased level of portfolio sales.
And the U S supply and pricing, we're stable and we're maintaining our market share.
We had a robust level of nonperforming loans on our balance sheet and.
I had a significant flow of volumes under contract.
Our cash efficiency ratio is increasing due to the progress we made on the operational front and we have a roadmap to continue optimizing our business.
And then Covid hit.
And the days weeks and months we're on.
And the impact of Covid unfolded.
It was truly amazed that the response from our team around the world.
We are treating customers fairly.
And as our business well and kept our staff safe.
Our culture of teamwork and collaboration helped us mentally cope with the pandemic, but thrive in spite of it and.
Watched our teams made significant progress and delivered great results. Despite.
New challenges all around them.
We made advancements on the technology front.
And continued rolling out digital initiatives and cloud computing advancements.
We delivered strong results and production and all the while treating customers with dignity patience and respect.
And so I'm sure. It's no surprise, how proud I am of the hard work and dedication and our employees showed in 2020.
These are unprecedented times and our employees willingness to hold true founding principles and core values. So it makes PRA a leader in this industry.
Moving on to the fourth quarter.
And Q4, we collected $482 million, which is more than any other fourth quarter and our history.
This was driven by significant growth and U S core non legal collections as well as record.
Europe cash collections.
Quarterly purchases were $290 million with over $200 million coming from Europe, where we continue to see some of the volumes that were paused earlier and the year and make their way to market and we continue to increase our market share.
And then rounding out the quarter highlights estimated remaining collections or ERC and ended the quarter at $6 5 billion.
And the Americas cash collections, and core and insolvency were $323 million, which was a record Q4.
The fourth quarter, and followed a more typical seasonal strength with the trends and the U S. But we're still seeing the shift away from legal towards call Center and digital.
For operational capacity remains strong and the U S. Despite social distancing standards, which are rightly required.
To keep our offices open and productive.
And been extremely impressed by our U S operations team and their ability to navigate these difficult times.
Frankly, I would have been proud of them that they would simply maintain productivity levels during 'twenty and 'twenty.
But instead, they produce productivity metrics that are well in excess of prior years.
For support staff remains and work from home status, but they continue to deliver like never before and on whether 'twenty and 'twenty without missing a beat.
Total portfolio purchases and the Americas during the quarter were $80 million.
Similar to last quarter. This remains slightly depressed as a result of decreased charge off rates and bankruptcy filings. However, we retained a healthy market share and are pleased with our pricing.
As we move into 'twenty and 'twenty, one we expect the current market conditions to persist and the first part of the year.
Given the continued government actions such as extension of forbearance programs, and the continued restrictions and stimulus or potential stimulus.
However, we also believe.
That with these very same program set to expire in coming months, we could see increased supply later in the year.
Before I move to Europe on a share our view on the regulatory environment and the U S.
Over the past three years, we've been working very hard to educate our public officials at both federal and state level.
Who we are as a company, how we do business and our operational practices.
And what we do for our customers and employees.
This included sharing with them the steps, we took to enhance our customer friendly practices and how we treat our employees, which I discussed earlier.
It's clear to me and especially during this challenging time.
It's never been more important to ensure that legislators and regulators understand that we take pride.
And doing things the right way for the right reasons, and our policies and procedures and actions reflect that.
Moving on to Europe.
Total cash collections and the quarter were a record $159 million.
Growth and cash collections and the quarter were driven primarily by strong portfolio purchases made in 2019 and 2020.
Well many other countries, we operate and instituted additional lockdowns during the quarter courts and a central businesses remained open so operations were not as impacted as they were earlier in the year.
For the European business is still operating at normal capacity, but it shifted back to majority work from home and similar to earlier and the year.
But to the credit and strength and determination of our European team, we've seen very little impact to productivity.
Portfolio purchases and the quarter were $210 million as.
<unk> and market share improved and we continue to see portfolios that were delayed earlier and the year coming to market and we expect this to continue throughout 2021.
Another factor that could provide additional supply is the NPL backstop rule, which went into effect and the EU and 2019 under this rule credit originators will have to fully provide for npls within three years of default as part of their capital adequacy.
And its creditors implement this rule and as more loans are impacted by this regulation it can make selling npls and more attractive option for European banks and the years to come.
Additionally, we're seeing unemployment rates starting to increase in Europe.
Government programs are focused on enabling employers to continue paying employees as compared to direct stimulus to consumers and the U S.
All told.
It's likely that we will see supply and Europe increased sooner than other states.
And as a result, we're optimistic about that pipeline.
And I'd like to turn things over to Pete to go through our financial results.
Thanks, Kevin.
During the fourth quarter, we continued to see the strong cash collections performance. We saw during the rest of the year global cash collections were $482 million, increasing $25 million or 6%.
This led to total revenues of $274 million.
And increase of $17 million or 7% on an adjusted basis.
Recall that under Cecil revenue has two components.
Versus portfolio income yields component, which was $233 million.
So I can as changes and expected recoveries, which has two parts.
First the cash collected and the quarter compared to expected recoveries, which amounted to $66 million and excess of expectation.
This was driven by significant over performance globally.
The second part is the present value impact from any changes and estimated remaining collections.
This quarter that netted to a negative $29 million.
We began assumed that the majority of the other performance seen in the U S. This timing acceleration of collections, rather than and increased the total expected collections.
On some portfolios in Europe, and other Americas, we have increased total estimated collections based on sustained performance.
Operating expenses were $185 million, a $1 million decrease from the fourth quarter of 2019.
Our operating expenses were reduced and the fourth quarter due primarily to lower legal collections costs.
Net income was $30 million, which generated 65 and diluted earnings per share.
Cash collections, and the Americas increased $5 million for 2%.
This was led by our largest ever fourth quarter for Americas core collections, driven by a 22% increase and U S. Non legal collections, which included a significant increase and digital collections.
U S legal collections decreased 16%, primarily due to our expanded consumer friendly practices during COVID-19.
And as well as the shift and collections to the call centers and digital.
Collections and other Americas decreased $7 million for 15%.
Largely driven by changes and foreign currency exchange rates.
Europe cash collections were quarterly record growing $20 million or 14% the.
The biggest driver of this growth was the record portfolio purchasing and 2019, followed by a strong purchase senior and 2020.
For the full year cash collections were a record $2 billion, it's exciting to see all the hard work by our employees pay off despite the challenges of 2020.
And as Kevin mentioned, if we had just maintained it would've been impressive.
But we generated results ahead of our expectations prior to adjusting for Covid.
Globally and cash collections on portfolios owned at the end of 2019.
For 105 per cent of our ERC expectations for 2020.
And with the Americas at 105% and Europe at 104 per cent.
For cash efficiency ratio was 61 nine per cent for the quarter, bringing the full year ratio to a record $64 five per cent.
We're very pleased with the 460 basis point improvement and the and the ratio and with our operational performance during the year.
Legal collection fees and costs were the largest contributor to the decrease in operating expenses when compared to fourth quarter of 2019.
This was partially offset by an increase and outside fees and services compensation related costs and other variable expenses.
And outside fees and services increased due to a number of items that are individually immaterial. The largest component was related to it initiatives and Europe associated with our continued efforts to enhance our operations.
Compensation and employee benefits increased due to a combination of factors that were mostly offset by a decrease and the number of full time U S collectors.
Our effective tax rate for the full year was 19, 7%.
And came in at the high end of our expected range of 16% to 20%.
The fourth quarter rate was elevated due to a combination of factors, including revenue mix discrete items and the catch up of the full year to the higher rate.
And 2021, it's our expectation that the rate for the full year will likely be and the low 20% range.
And 2021, and we'll continue to focus on improving the efficiency of our operations, but do not expect to repeat this year's record cash efficiency given that we generated record cash collections combined with the reduced operating expenses as a result for the environment during 2020.
We believe the fourth quarter ratio is more indicative of what the ratio will be for the full year of 2021.
ERC at the end of the fourth quarter was $6 $5 billion with 46% and the U S and and 49% and Europe.
This marks the first time in company history that the ERC in Europe exceeds that of the U S.
Although you are see decreased from the fourth quarter of 2019, it increased $143 million from last quarter.
Our continued strong cash and financial performance has driven significant improvement and our leverage position.
For the 12 months ended December 31, we generated $1 $3 billion of adjusted EBITDA.
And increase of over $200 million when compared to the full year of 2019.
As a result, we ended the quarter with a debt to trailing 12 month adjusted EBITDA ratio of just under two times compared to just over two and a half times at the end of 2019.
Significant investment levels and the fourth quarter caused this metric to tick up slightly from the end of the third quarter, but it is well within levels that we're comfortable with.
Our capital position is strong with nearly $1 billion available for portfolio investment. In addition to the adjusted EBITDA generated by the business.
Now I'd like to turn things back to Kevin.
Alright, Thank you Pete.
When I look back at PRA, and <unk> and 'twenty and 'twenty.
I'm, so proud of our employees and all they accomplished despite the global pandemic.
We faced challenging times and road rose to the occasion and globally.
PRA employees remained empathetic and understandings when interacting with our customers.
Protect our employees, we immediately shifted our support functions and some of our operations team to a work from home status.
Put enhanced cleaning and social distancing measures in place and kept those who were in the office sales.
And this effort PRA was awarded the global Bio risk Advisory Council Star certification.
This is the cleaning industries accreditation for outbreak prevention and response and recovery for facilities and the U S.
Communication was also more important than ever and 2020 I personally kept in contact with many employees over video conference throughout the year and listen to their concerns answered.
Answered their questions and assure them that we get through this challenge.
And we get through this challenge and I shared our strategies and our thoughts.
To give you some perspective since March and I've held approximately 60 meetings and general last generally last thing and our more reaching 1400 people globally and fairly small personal groups with just over 20 people on average and our meeting.
And I plan to continue these calls and 'twenty one.
And I plan to increase the total number of employees reached by 50%.
Yeah.
Despite all the challenges presented by Covid, we produced record results in 'twenty and 'twenty.
And we collected record cash with success of records in Q1 Q2 Q3.
We generated the best cash efficiency ratio and company history.
We received ratings from Moody's and Fitch.
Issued our first unsecured bond and retired our maturing convertible bonds are.
Leverage metrics are well within our covenants and put us in a good position to buy more portfolios.
And it's sometimes hard for me to believe as one of the for people who literally started this company on a folding table windowless office that we are beginning our 2005th anniversary year.
I'm extremely confident and no matter what challenges we encounter the PRA team can adapt as we always have.
We do the right things for the right reasons and have a proven track record of sticking to our long term view not just words and I just hope.
They've proven and demonstrated track record over decades of business.
All of this helps our customers recover and.
Employees thrive and at the same time driving exceptional results.
And they're not mutually exclusive things rather overtime, they enhance each other and all.
Operator with that we're ready for questions.
We will now begin the question and answer session.
And so good question and their press Star then one on you touched on and stuff.
Using a speakerphone please pick up your handset before pressing and kids.
To withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Our first question on will come from Bob Napoli with William Blair. Please go ahead.
Thank you and good afternoon.
Kevin Inc.
And army knife.
Nice job.
Nice job on the year.
Oh.
Thanks, Bob.
And you here.
And.
A little bit beer, yeah keep going okay.
And so.
Balance sheet, obviously is in great shape and.
And the portfolio purchases or not and you know there.
No for now I think like you said they'll pick up but any thoughts around.
Other utilization of the capital that you're generating.
Either returning capital.
Or strategically are you are you interested or you are you are searching for.
And <unk> acquisition.
And the U S or Europe on tangential businesses are.
Similar types of business and so any thoughts just on.
And what Youre going to do with a really strong balance sheet.
Well, let me take the second half of that piece first and I'll, let <unk>.
Pete and CFO and talk about the balance sheet.
<unk>.
And so.
Obviously, our number one priority is to buy Npls, I mean that probably goes without saying and everybody realizes that.
And one of the things that you mentioned you mentioned M&A.
You know sort of the problem, we deal with and M&A is it we've got a really.
Comprehensive platform in Europe, you know were and they'll.
And go over the World, we're in 18 countries and.
You know largely where we Wanna be you know and I think about places in Europe. We're not you know we're not in France, and Greece. For example, I don't think there's any any rush to go there and so.
You'd have to find something that.
Has the right value. So so would we consider M&A you're sure, but it would generally be to acquire npl's and unless there was some platform and that we didnt have which I really can't think of right now because you know I don't I'm not I'm not a guy that wants to put a bunch of goodwill on our books I like I like to have a good strong tangible common equity so.
And if you found it if.
If you found a cut.
A company that was you know from trouble I guess and the value was such that we could you could generally tribute that to Npls and then I would say that would be something we'd look at it but.
I don't see anything at this point and time, Pete you want to talk about our equity section Yeah. I think the first part of that was was really focused on.
The portfolio purchasing and our view is that it's not a it's.
It's not an if but when and we've we've.
<unk> spent considerable effort to get our balance sheet and shape for that that wave and we're looking to probably back half of this year, where we think that our higher levels of portfolio will start to come I think that probably starts to occur in Europe, and maybe a little sooner.
But that's that's our primary focus for us.
For deployment of capital.
And then a follow up on Europe.
What areas of Europe are you finding most attractive today and know that Europe is actually larger on and ERC basis than the U S. Just any thoughts around and returns.
The European business versus the day.
The Americas business.
Okay.
Sure.
I would say broadly.
Europe's returns are very strong certainly areas like the U K right. So it's a very mature market.
You know some of the some of the more difficult areas remain you know places like Italy, and it's just a complicated place to do business and.
And and you know our market share is lower and say on Italy, and Spain actually even in Poland, and then something more like the U K, but we do we do a lot of other markets we're in and.
And I would say you know, we're certainly looking at yields and comparing them you kind of net after tax to the United States and and Theyre very strong and I don't.
And really have any more to say about that and let Pete wants to add something.
Yeah, I think just the thing to keep in mind, because a lot of times.
And you know folks are looking at gross purchase price multiples and the tables that we disclose.
You know the curbs and Europe are longer curves.
There are more stable profile and generally a lower cost to collect.
And then the U S. So again, where we're pricing on kind of.
On a net a net return after after cost to collect after sort of factoring and taxes and cost of funding etcetera.
And we believe we're putting money to work there on an equivalent basis, what we do and in other geographies.
Okay.
Thank you appreciate it.
Yeah.
Our next question will come from.
David Star with JMP. Please go ahead.
Hi, yes, good afternoon.
Hey, David and David.
A couple of questions.
But before that Kevin.
And it wasn't lost on me that.
You spend much more time and and went into much greater detail.
And then really any company I've listened to you know discussing all of the steps you've taken to protect your employees and.
And.
And I think listen there are over 500000 reasons why that observation alone is notable and so.
And I sort of offer up that acknowledgment after such a challenging year.
Thank you I appreciate that.
Two things one on.
Well one on Europe.
And I just wanted to I guess better understand.
Well, what's going on there and specifically.
You know I I can recall.
For a while you kept making references to how a lot of other competitors.
Being.
And as private or force by bondholders and otherwise to Delever.
You were sort of sitting on the sidelines during what.
Do you observe to be a very aggressive pricing environment biding your time.
And in particularly.
And the third quarter.
Really saw sort of that market now kind of open up and come back to you and to your patience paid off but.
It's been a while it's been a good year and a half of those competitors delevering. So can you kind of bring us up to date.
And what the competitive environment is now I mean did.
Did you still feel like.
You know you you use you've got a lot of competitors on the sidelines or if they returned and I'm just trying to get some better context on.
On why the volume level.
Okay.
Our range.
Alright, well that's.
That's right down the fairway, David Thank you for that.
So a little bit of history for everybody else on the call.
And there was a time certainly in 2016, 2017, and 2018 and we were very open [laughter].
And they open and honest about what we thought about yields and Europe actually.
Letting folks know on calls like this.
And what we thought yields were doing and how many of the deals traded for negative returns and how many what percentage trade. It for low single digit returns and it was just unsustainable market.
And.
And we long talked about this thing and this concept how patient, we are which which David brought up.
And I think about that time, and you know I think a lot of companies would have downsized they would've cut costs. They would have been all sorts of.
Yeah, conga and cost cutting measures and and instead, we almost did the opposite and doing that in 2016 2018 timeframe.
We invested and the company.
We invested and new collection platforms, we are investing in digital we invested and data we hired new people because we believed that that was a temporary blip that was unsustainable.
And and we were right and and if you look at.
It wasn't until the first part of 2019, you know maybe that last quarter and 18, but certainly 2019 was it was a record buying year for us in Europe and.
And that was the result of all those investments and 16 to 18 and of course, the competition kind of pulling their horns and.
And then of course 2020 was it was a great year for us He certainly and second half was better than the first because of delays and selling but that is the that is the kind of.
Net debt, we are that we were dealing with in Europe. So.
The question about what other competitors doing you know I don't want to spend too much time talking about them, but they're.
And there there is certainly some.
Churn and I would say in Europe, and and management teams, we do watch and the competitors in Europe.
There are some board turnover and there is a number of Ceos rotating around and CFO and COO. So.
Yes.
To me when management turned on like that it doesn't generally.
It doesn't generally.
And support the idea that things are going well, so I guess I'll leave it at that as far as leverage goes I don't I don't know that let them have have de levered took to a great degree and maybe Pete can add something to that yeah. I think that's that's correct I mean, I think there's probably.
Really only one.
For the European competitors.
And that's actually made meaningful progress and they are deleveraging and and the others are.
Pretty much where they were when they started the journey, they're well above.
The targets they set for themselves and.
You know those targets that they're they're trying to attain or.
Above the levels that we normally operate out so I think that's gonna be a continuing pressure point.
And for them.
As we move forward I mean, certainly this year with lower volumes being purchase that's that's giving them some reprieve, but I think.
It still will be a gating factor for for competition and Europe.
Okay.
Very helpful.
One follow up.
Switching to the domestic side.
And and the guidance Pete on how to think about the efficiency ratio this year.
Helpful.
Uh huh.
Looking at Q4 as a as a benchmark.
And I'm wondering if this has to do with legal and and maybe the long term margin structure.
You know what what whether its just you know regulatory.
Actions or potential regulatory.
Climate going forward.
It's the legal channel going to become a dinosaur and this industry do you think.
I mean, it's obviously that's a.
Channel and.
And it just feels like the channel shifts and naturally be lowering your cost to collect and I'm wondering if there's anything that may accelerate that further.
Oh I think that's a great question, David and it's something that we talk about internally a lot.
So I addressed it in my script, we certainly prefer to engage with people and our call centers and over with digital and we're very flexible we can take really small payments from from folks, but theres just a group of folks who don't who won't engage with us and that's always been the case, but during 2020, it's been fascinating.
And because we.
And we've talked about this on past calls.
Other it's because you know they can't fly somewhere and they can't go out to dinner and where they couldnt shop at the mall you know all the things we've talked about whether it's stimulus money and whatever it might be they've.
And they've chosen to engage with us on a voluntary basis now.
One of the things that I think about is that I'd love that to continue I would love I would love nothing more than legal to become a dinosaur.
And I don't think it is and and.
Now, whether it's 'twenty, one 'twenty, two or whatever it might be but.
Think about things like there will be this will and write this whole thing will and this this locked down thing will end and and people will be.
Bust out of their houses and when a fly everywhere and and want to go and never want to eat and their homes again and and our customers are probably no different and that's going to cause.
It's gonna causes stress on on their either their willingness or ability to pay our debt. They're dead on so I think about that a lot and I think you could certainly paint a scenario where things go just go back to where they were.
We're going to try and that we're gonna try hard to get people to understand how flexible we are and where we're actually pretty easy to deal with them, but if we look for unsuccessful I would say that legal channel ramp back up at some point.
Well you haven't done it more to add on that.
No I think that's right.
In terms of trending I think are.
Probably the fourth quarter level is probably a good way to think about it somewhere and that that seems that.
And at least for the near term.
Alright, well, thank you very much.
Yeah. Thanks, David.
Yes.
Our next question will come from Robert Dodd with Raymond James. Please go ahead.
Hi, guys and and.
I concur with let's say that on on the comments about the things you've done to take care of you and place them on.
On the.
The European purchase volume I mean, there this quarter, I mean, and a very big number and installs and so you're right I mean, it does tend to be seasonal it tends to be lumpy and it's a good number last year as well, but it's a much tougher environment and you talked about.
More supply kind of had been pent up coming back.
Instead of a change should we expect more of that and solvency type.
Activity to continue coming in Europe for just the seasonal abandoned that.
And that kind of produced a really good number and that one particularly this quarter.
Yeah.
I would love for it and can do we love that asset class, we love the asset class and United States as well.
But I wouldn't read anything into it I wouldn't read anything into it.
Okay.
Yeah on on.
The efficiency I mean, and I appreciate the guidance as well on for.
Fourth quarter kind of being the run rate.
Eventually supply whether.
Whether it's second half for 'twenty, one and in various geographies or 22 or whatever it's going to happen.
Is this level of fish and proficiency sustainable if there's more supply on.
Or is it.
And we could we see efficiency improve as you get more E. Aussie to web and may be this level or something between the fourth quarter I'm talking about the fourth quarter and the full year being achievable. If there's sufficient E. All seem to be worked out.
Maximal efficiency, because obviously you've done a great job on improving efficiency at this time.
Yeah look I think you know our our long term focus is on continuing to improve the efficiency of the operation and that's that's one of the key metrics that the management team measures and so on and we've been kind of on a journey of improving that.
You know year in and year out here for some period of time.
The the level, we hit this year had some exogenous factors.
And that helped boost that but I think certainly over time, we would aspire to sort of climb back to that climbed back to that level, but.
I can't say with any certainty that that's going to happen and in 2021, which is why we gave sort of the and the.
And more moderate guidance on that point.
Got it thank you.
Okay.
Our next question will come from Bob Napoli with William Blair. Please go ahead.
Hi, Thank you just a follow up on Pete on the need for non controlling interest for $6 8 million this quarter.
Can you give some color on that and it has such a big effect on.
On the earnings and obviously, but just some thoughts on what that will be in 2021.
And the drivers again that some.
And that that's driven primarily by our joint venture structure down and.
South America, So Brazil had had a big had a big quarter and as a result.
They they they share their portion of the results.
I would like for like for the South American busy.
Business continued to grow and can true contribute and as that happens, we'll have sort of proportional increases to to that Noncontrolling line item.
Is that I.
I mean is this a new level or was there is it is it the returns in Brazil, where they seasonal such that this is now and how does it flow through the income statement.
Hi.
It's fully consolidated so it's a part of every every line item.
And in the income statement.
And the one one nuance being.
Because of.
The fact that we sold are our master servicer down there in 2019.
The cost to collect comes through the agency.
Line and so that's that line will move around as Brazil.
Brazil is one of the primary drivers of of where we're using kind of a quote unquote external party to do collections. So.
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But that's kind of I guess, what I would say about about how those JV and flow through and then obviously, we get to net income and we have to share the portion back with the JV partners.
And again is that you know that $6 8 million a day is that number.
Is that a predictable number because we don't really have any details on what's going on in Brazil and your presentations.
Yes, I think it's going to I mean, they are the bulk of other Americas. So if you think about it and that way and we give we give disclosures on other Americas.
Yeah, you know again.
And I would hope that that number grows over time as the as the South America earnings grow over time.
And then just for Kevin and we get question all the time on buy now pay later and what that means for the credit card industry and if there is some market.
Market share shift to the buy now pay later space.
And and I was just wondering what your thoughts were on that and if that is an asset class.
And that you've taken a look at and that makes any sense for PRA to get involved in.
Sure.
You know, it's it's an asset class and.
And we had purchased you know years and years and years ago, probably measured by decades ago at this point.
It's something like it and.
It's really about.
The documentation and what's it's really about it's really about.
And.
And have those folks mature to the point, where they can supply.
Strong and what we call O L. D original account level documentation that qualifies under CFPB scrutiny.
And quite frankly I I.
And I want to make sure that it's well viewed by regulators.
And I don't like for instance, on I'm not interested in buying medical debt right. So that's I think everybody probably shaking their heads on that one and so as long as it's viewed as a as a good solid thing it's good for consumers.
And they can provide good documentation and I would certainly think about buying that yes.
And by the way ill add one of our one of our strategic priorities is to expand products and market share. So we I mean, we have five strategic priorities and and that's that's one of them. So.
And any more color on those products.
And any thoughts on targeted market share I guess.
No, but but no no more thoughts on it and I've got some stuff internally.
But the stuff on the products that will follow and what I. Just told you on you know I just.
And we we want to keep everything clean everything clear.
We're not interested in you know again you use an example of biomedical that it's not something that I wanted I wanted to get.
Yep.
Thank you appreciate it.
Thanks, Bob.
And this will conclude our question and answer session and back to turn the conference back over to Kevin Stevenson on for any closing remarks.
And thank you very much and thanks, everybody for it for joining the call. This evening.
And again, everybody. Please stay safe and keep your family and your friends Safe and we do look forward to speaking to you next quarter. Thank you.
Yeah.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.