Q4 2021 PRA Group Inc Earnings Call
Good afternoon.
And welcome to the P. R. A group conference call all participants will be unless it only mad so.
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I would now like to turn the conference over to Mister <unk> pardon.
Senior Vice President of Finance and Investor Relations for a P. R. A group. Please go ahead.
Thank you good evening, 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, We will make forward looking statements. During this call with <unk>, which are based on management's current beliefs projections assumptions and.
Expectation, we assume no obligation to revise or update these statements. We 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 R. S V P.
Filing for a detailed discussion of these factors.
The earnings release, the slide presentation that we will use during today's call and R. S. A SEC filings can be found on the investors section of our website at Www Dot P. R. A group dotcom.
Additionally, a replay of this call will be available shortly after its conclusion and the information needed to listen is in the earnings press release.
All comparisons mentioned today will be between two 420, 20 and queue for 2021, unless otherwise noted and are America's results include Australia.
During our call, we will discuss adjusted EBITDA and that to adjusted EBITDA for the 12 months ended December 31st 2021 and December 31st 2020. Please refer to today's earnings release in the appendix of the slide presentation on our website used during best call for a reconciliation of these non-GAAP .
Financial measures to the most directly comparable U S got financial measure.
I'd now like to turn the call over to Kevin Stevens, and our President and Chief Executive Officer.
Well, thank you Lauren and and thank you everyone for joining us this evening.
I do have two comments to make however, before we begin.
You know over the past few days, we've all watched the situation unfolding in the Ukraine with great concern Uhm My thoughts are not only with the people of the Ukraine, but also with our team members across Europe and a.
Especially Poland.
So those members of the P already family I am deeply sorry for what you're going through now you must be feeling right now.
And we're determined to support you.
And while this is happening we can't forget that we're two years into a pandemic and it's ever changing.
The beginning of the fourth quarter, we were discussing vaccination rates and returning to office and many of our area isn't that omicron hit.
We continue to keep many of our employees and I work from home status, while maintaining a strong workplace workplace safety standards in our in office employees.
I am I'm certainly proud of how our team continues to adapt as the pandemic progressive.
And while the pandemic is proven challenging everyone from a financial perspective.
21 has been very successful for the company.
We achieved record cast collections record revenue record cash Patiency and record net income.
In queue for we collected $474 million globally. This is driven by strong European cash collections, which increased $20 million compared to the fourth quarter of 2020.
This brings our year to date global cash collections to a record $2.1 billion.
Three per cent ahead of our previous record from 2020.
Net income attributable to P. R. A group for the quarter was $34 million and a record $183 million for full year of 2021, which was an increase of 23% over last year.
Quarterly portfolio purchases were $202 million, bringing the total purchases for the year to $972 million.
Best friends in 2021 reflect the importance of our geographic diversification.
The investments were split nearly evenly between Europe and the Americas.
Reflecting on that just for a moment and 2017.
Europe <unk> represented about 25% of our global bye.
Additionally, we continue to focus on growing our market share and our European purchases were less weighted towards the U K as compared to prior years.
And then finally during the quarter, we repurchased $139 million of our common stock.
The $139 million deployment equated to 3 million shares at an average price of around $46.
So in total over the past two quarters, we returned $213 million to shareholders repurchasing 11% over outs bankshares.
Previous quarters I've shared the five strategic objectives that guide our company.
Draw a 2021, we build upon our prior success in each of these areas and these objectives will continue to guide our efforts throughout 2022 and beyond.
So first we continue to expand products and market share.
It's been a long term goal of ours to be geographically diversified and during 2021, we increase the presence our presence in northern Europe and South America.
A greenfield operation on Australia continues to grow as a built out our team locked in forward flows and successfully collected on the portfolios we purchased.
About 2021, we purchase to test the portfolios of new products in selected markets. We've gained valuable data in this process, which we believe will allow us to make more substantial purchases in the future, thus expanding our addressable market and providing opportunities for growth.
As a further driver to expand market share in 2022 and beyond we will continue to selectively evaluate M and a opportunities.
Will focus on companies that either enhance our existing footprint.
Give us new skills or capabilities provide.
Provide access to new credit originator relationships in data.
Or allow us to enter a new market.
The next two strategic objectives, both focus on optimizing our business.
We've made great strides to modernize collections with our investments in both digital and data and analytics.
These improvements allow customers to interact with us using the medium in which they prefer while at the same time driving efficiency.
Operationally 2021 was a great year for us as evidenced by our record cash efficiency ratio.
And the U S are digital platform continued to drive collections that are your significant part of total collections.
Since the first quarter of 2019 or digital collections are up 83 per cent.
Domestic call center productivity remain high throughout the year as you recognize the benefits of recent improvements in scoring and analytics, allowing us to maximize the value of each collector hour.
Cash collected for collect your hour in queue for 2021 increased 14% over Q4 of 2020.
Additionally, as more customers have paid digitally we've had fewer accounts and our legal inventory.
And the U S. We've been executing a multiyear initiative to build out our internal legal capabilities.
Hiring the necessary attorneys and implementing software to help maximize efficiency.
So for example in 2019 <unk>.
Internal legal placements represented less than a third of our legal placements.
2021, it represented over half of our placements.
This represents a significant savings because we don't have to pay commission to the external attorneys on every dollar collected.
In Europe , we continue to benefit from investments in technology.
These include investments and digital platforms cloud based dialers infrastructure robotic process automation and integration into supporting systems.
We now have digital platforms, and all countries, where <unk>, where we have operations.
Enabling queue for digital or European digital cash collections too.
To grow nearly five times since the first quarter of 2019.
Globally, we continued to invest and data analytics to support our operational objectives. During 2021, we further improved or a predictive scoring models used in underwriting.
We tested new data sources.
Develop new machine learning solutions that added efficiency and approved or legal and outbound calling strategies.
The fourth strategic objective is to be recognized as a trusted brand.
Over the last few years, we've had we've significantly increased our interactions with regulators and elected officials, making sure that we are in control of our narrative.
We've seen tangible success and our work here.
Allowing us to build relationships impact legislation.
And become valued partners to our industry.
And trade Association colleagues.
We've now taken this recipe for success to Europe .
Wherever you just hired our first head of government relations to lead our legislative work there.
Our fifth strategic objective is fostering a high performing workforce I've.
I've always valued our employees and always recognize that they are the reason for our success, but I believe this objective is particularly important in today's job market.
No company is immune from the great resignation.
And while our turnovers increased since 2020 I'm proud to say that are 2021 statistics were better than our pre pandemic levels. I think this attribute to a strong brand and company culture.
In 2021, we continue to embrace our D N I strategy and launched or be yourself and be your best campaign.
We aspire to create an environment or every employee feels comfortable doing their best work and being themselves.
We also introduced an employee staff diversity, an enclosed inclusion steering committee.
We launched our first ever company wide diversity and engagement survey and.
And we held our first global inclusion weeks.
Also we establish a three new employee resource groups.
Women in business.
Mental and emotional wellbeing.
And caregiver allies.
Yes, G front I'm happy to announce we've hired a dedicated internal resource to manage our yesterday efforts.
During the fourth quarter, we announced a new operational hub at the Halo Enterprise and innovation Center in Kilmarnock, Scotland.
This is the first net zero carbon energy development project in Scotland.
It's powered by renewable energy.
The 15 year commitment reinforces PRA dedication to enduring sustainability as we build career opportunities and prioritize energy efficiency.
Onto a personal passion of my charitable giving.
I'm happy to say the PRA donated a record amount in 2021.
And that included nearly 100 different non-profits.
We ran programs to keep employees engaged and allowed them to support the non-profit of their choosing.
Most notably are 250000 dollar for 25 year campaign allowed employees to nominate the charity of their choice, which.
Which resulted in 10 non-profits around the world.
Being awarded $25000 each.
For those who haven't looked at art, Yes G. Tearsheet. Please visit our website and view it yes.
E. S. G will continue to be an important focus for us I think it's evidenced by a higher of our first director of a U R. E. S T.
Additionally, in the coming months, we'll be updating our tear she and we look forward to some enhanced disclosures as well.
From an investment perspective, we deployed $202 million in the fourth quarter.
<unk> 2021, we invested broadly across the globe, allowing us to deploy 19 $72 million and portfolio purchases, which is an increase of $67 million in 2020.
This achievement clearly demonstrates the power of operating a geographically diverse enterprise.
Combine that with our strong cashflows R.
Excellent underwriting our balance sheet and ample access to funding we.
We believe we are in a great position to shift capital broadly across our markets, where it can be best deployed.
And the Americas, we invested $111 million during the quarter.
And the U S. We continue to see similar levels. So I'm marketed deals the first three quarters of the year.
Many economic indicators according to higher volumes on the horizon. So for example.
According to the Federal Reserve Bank of New York.
Edit card balances at the end of 2021.
Increased $52 billion from Q3.
This marks the largest quarterly increase observed in the New York Fed 22 year data history.
This coupled with decreased household savings rates and increase consumer spending we just to believe we are moving through a trough in supply in the U S.
We we believe the volumes will build by the end of 2022.
As I indicated earlier this year the pipeline in Europe has been healthy.
However, we didn't see competition increased during Q4.
Certain markets are experiencing more competitive pricing than others.
To discontinue into 2022 will stick to our long term track record of remaining disciplined.
And only deploy capital returns where returns makes sense.
In Europe , we invested $90 million during the quarter, bringing the full year investment to $477 million.
2021 was the second highest year for European portfolio investments since entering the European markets broadly and 2014.
We also believe inflation rising energy prices rising interest rates could possibly be a catalyst for increased supply.
Our maximum committed for slow volume with $651 million in December 31st 2021.
This is a meaningful you're and records of the company.
It's also a substantial increase over last year looking.
Looking back we set our prior record a floor under contract as we entered 2021.
But the current volume entering 2022 represents an increase of $149 million or nearly 30%.
Includes $247 million in the Americas.
And $404 million in Europe and.
And while this number will fluctuate throughout the year based on a number of factors. The thing to focus on is the increase over prior Q4 number. We believe we are well positioned heading into 2022 now.
Now like to turn things over to <unk> to go through the financial results.
Thanks, Kevin.
We continued strong performance with total revenues of $257 million for the fourth quarter and a record $1.1 billion a year to date.
Which represents 3% growth on top of last year's record revenue.
Total portfolio revenue was $252 million with portfolio income of $212 million and changes unexpected recoveries of $40 million.
During the quarter, we collected $36 million in excess of are expected recoveries.
Bringing the year to date total to $251 million.
Operating expenses were $174 million, the 10 million dollar decrease from the fourth quarter of 2020.
This was driven primarily by decreases in legal collection costs and compensation employee services.
The effective tax rate for the year was 22% and we expect 20 2022 to be in the low to mid twenties.
Net income was $34 million, which generated 79 cents and diluted earnings per share for the fourth quarter.
Net income for the full year was $183 million generating $4.04 and diluted earnings per share and.
An increase of 24%.
For the quarter cash collections were $474 million for.
For the full year of 2021, the America's collections with $1.4 billion and were ahead of our expectations.
We continue to see solid operating metrics in our digital collections, there's more customers utilize these platforms. During this period of increased consumer liquidity.
As a result compared to 2020 America's digital collections increased welcome.
Well call center illegal collections decreased.
European cash collections grew almost $20 million or 12% in the quarter.
For the full year of 2021 European cash collections grew $129 million or 22%, which was a record for Europe .
The strength of our Pan European Operation is allowed us to invest it favorable levels over the last few years and this is driving the growth and our European business.
<unk>, our investment levels and 2017 were split about 75 per cent in the Americas and twenty-five percent in Europe .
And over the next few years the split was closer to 50 545.
And in 2021, the investment was split nearly 50 50 and as a result, we're seeing very strong growth in the business in Europe .
Our cash efficiency ratio was 63.5% for the fourth quarter and 65.3% for the full year.
Although we experienced some expected normalization with the efficiency ratio in the latter part of the year.
We achieved record cash efficiency in 2021.
Looking forward into 20 twenty-two we expect the fourth quarter trend to be more indicative of the level we could attain.
Even with some downward pressure on our cash efficiency ratio.
It will still be significantly improved over a pre COVID-19 levels.
Well, we do not expect the same levels of consumer liquidity, we've seen over the last two years, we believe the efficiency gains we've achieved on the operational side for here to stay.
He or she at the end of the quarter was $6 billion with 41% in U S and 52% in Europe .
Well this is a slight decline from last quarter were encouraged about our improved diversification over the past year.
Within Europe , the proportion of ear see coming from northern Europe increased as well as the proportion coming from other Americas.
This validates our diversification strategy and our ability to deploy capital in any market as opportunities become available.
We expect to collect $1.6 billion of our ear see balance during the next 12 months and.
Based on the average purchase price multiples we recorded in 2021.
We would need to invest approximately $900 million globally over the same time frame to replace this runoff to maintain current your sea levels.
I think this levels attainable, but it will be dependent on the normalization with the U S market, we're expecting to happen during 2022.
Our capital position remains strong for their leverage ratios remaining below or long term target of two to three times debt to adjusted EBITDA.
We ended the year with $1.4 billion available for portfolio investment.
And Additionally in 2021, we generated $1.4 billion of adjusted EBITDA, an increase of over $40 million when compared to the full year 2020.
We believe that having the ability to fund larger deals as they come available gives us a competitive advantage and.
And we will continue to evaluate or funding profile and mix of secured and unsecured look for opportunities to expand our investor base.
During the fourth quarter, we repurchased $139 million or 3 million shares of our common stock at an average price around $46 per share.
Bringing the total for the year, the $213 million or 11% of our outstanding shares.
Additionally, during 2022.
Repurchased the remaining $17 million authorized under the program and.
And last week, our board of directors approved a new $150 million share repurchase program.
Are strong cash in financial performance Conservative capital structure provide considerable flexibility for balance capital deployment across portfolio acquisitions share repurchases and the other growth initiatives now.
And I would like to turn things back together.
Well. Thank you Pete looking back on 2021, I'm extremely proud of our employees and their accomplishments despite.
The ongoing challenges of the pandemic.
We face many obstacles and rose again, just as we did in 2020 and we've achieved multiple records.
Record cast collections record revenue.
Regular cast efficiency ratio and record net income.
Our success was directly attributable to our exceptional team and our focus on our strategic objectives.
And my 25 years of PRA, many things have changed in the financial services industry, especially recently.
As we moved to a world digital payments digital wallets crypto currency buy now pay later in a to a banking it's.
It's interesting and exciting to see this kind of overhaul of the industry.
We've not seen this magnitude and velocity of change in quite some time.
We've successfully reacted to these changes through the development and evolution of our digital platforms, and improving improving and leveraging our data and analytics.
We're utilizing its capabilities as a way of better understanding our customers and enabling them to pay through the channels that they prefer.
Very proud of our team and the significant progress they've made.
But.
Throughout this transformative time in any industry. There are a few things that remain unchanged.
We are committed to delivering longterm results we.
We maintain a strong conservative balance sheet we.
We treat our customers with dignity and respect we.
We give back to the communities, where we live and work.
Looking ahead of 2022, we will continue to deliver on our strategic priorities, we will continue to share our progress with Ya.
We will continue to adapt to the ever changing needs of the customer.
We will continue to deploy capital profitably.
And if they efficiently collect on our portfolios.
Will continue to provide additional diet or shareholders, whether that be through organic growth M&A or share repurchases.
We do the right things for the right reasons, we have a proven track record of sticking to our long term view as I said before now just words and I just hope that.
But a proven and demonstrated track record over decades of business.
Operator, we are now ready for questions.
Thank you.
We will now begin the question and answer session.
To ask a question you May press star one on your telephone keypad.
You're using a speaker phone please pick up your handset before pressing routine.
Yeah like the Guy your question. Please press, sorry, then too.
At this time, we will pause momentarily to Santa Barbara.
Our first question comes from Bob Naphthalene.
And lastly, I had.
Good afternoon, Kevin <unk> nice job on the quarter on the year, So I guess.
My first question would just be.
The comment you made Kevin around testing purchases of new products.
Selectively in different markets with all the change to use obviously seen in financial services with new products like by now Payloader and different types of consumer lounge.
Can you give a little color on what you know around what you're testing or where do you see opportunities.
For new products.
Uhm, Yeah, just generically you know historically, we have you know.
Largely stuck to credit card private label and those those kind of products and I guess I.
I don't want to be too cute about it so don't don't get me wrong here, but I I I, just don't Wanna talk too much about specifics on the <unk> kind of products we purchased.
I'll tell you that it's again, it's stuff that we we generally haven't purchased in the back in the past and it's in both the U S and in Europe . So you know what well is it is it gets larger will will will will expand on that a little bit.
Overtime.
Okay. Thank you and then another.
The the Ford slow.
Portfolio that you have how are the IRR as in that Ford flow versus say a year ago. What are Ya I mean, I know you did call out some additional competition in Europe .
Or the I R. As in line with historical levels for the for it so hopefully.
Yeah. The returns you know is any with any supply and demand equation. They are they are come <unk> come in a little bit I guess, I would say that yeah, but but they're still at levels. We like we'd all love to buy at 2020 levels for it for a long time, but we're happy with these.
And I guess, we'll put some slow picking up 20, and the ear that might be helpful totally times, but.
I agree I agree yeah.
The the cash efficiency ratio. So I guess, the 63.5, I mean, I think that is that a reasonable target for you and.
Oh forward basis for 22 and forward.
Yeah as I said I think that's probably indicative of where we go into next year. You know, we're we're always looking to improve efficiency is one of the <unk>.
Core objectives, but we know we're gonna have some pressure just given we're we're not gonna have the top line liquidity that we've had.
In the last year or so so I think that's that more recent trend is more indicative of what we're gonna carry into next year.
Great. Thank you I'll turn it over the floor.
Thanks, Bob.
Our next question comes from David Chang.
M P's security. Please go ahead.
Yeah. Good afternoon. Thanks, Thanks for taking my questions Uhm.
Given it.
Wanted to maybe get a little more color on and the U S market I I apologize. If this is a rambling question ultimately with them you know.
Hoping to get some.
A better understanding of is whether you think banks are gonna behave the same way they haven't prior cycles and you know the reason I ask this is.
We see the same external data that you do in terms of delinquencies rising loss rates rising.
And the New York Fed data, but but ultimately it's a really weird credit cycle in the sense that you know it it's not losses going to kind of peak levels. It's really just credit normalization returned to prepandemic loss rates and it's also a unique cycle, because it's really sort of the first rising.
Loss rate cycle post dot Frank where.
Are much more well capitalized I'm.
Not sure if they don't feel as compelled.
To.
You know short of capital and sell charge offs to the extent they have an all prior cycle. So so excluding just you know the same lost data that we see did you get any sort of qualitative for strategic feedback from your sellers about you.
Whether they're going to sell as much as loss rates go up as they.
Have an prior cycles, because things have shifted a little bit.
That wasn't that rambling, David that was okay [laughter] I.
I I don't I don't I'm not hearing anything that would lead me down the road it there'll be some shift away from where the rash you you think about just this year as I mentioned in my script.
The volume's, we see in the U S are pretty consistent with the prior three quarters.
I've not heard any number of years ago people were talking about bringing stuff internally. If you remember some of that and I don't hear anything like that.
And in Europe . The volumes are are strong in Europe . So I don't it's not high on my list of things that I am but.
But either concerned or or thinking about now you know I guess you've been around long enough. You know is is it enough to maybe shake loose some people who aren't selling today I don't know if that's the case or not but you know we keep we'll certainly keep keep working on those those trees as well.
Got it and then maybe as a follow up shifting from the U S to Europe .
As it relates to the comment about.
Coming a little more competitive in the last few quarters can you just.
Maybe maybe put that into historical context.
Cause if a few years ago, obviously, it was excessively competitive and you buy it at your time and obviously.
Discipline paid off very very well.
As you use the term more price competitive this past quarter.
Should we still view that as just relative to the last couple of quarters, but nowhere near sort of a frothy. This if a few years ago.
Thank thank you for asking that question because I I I.
I'm ready for it and I think that's a great. It's a great way to lead in so.
Let me tell you what this is not an I'll focus on Europe for a second this is not 2017, and 2018 and and I actually went back in preparation for the call and looked at some of my old notes from a conference back in June of 19, and I I referenced in that conference that you know kind of the irrational pricing in Europe .
Started really and we talked to start talking about it in Q3 of 16 cultural Landgrab and then then I gave some data.
I think it was in the queue one of 18 call where.
60% of the deals in Europe were trading firm.
Low single digit negative return. So we are not there [laughter], we're nowhere near that so.
That's the message I'll give you guys a good volume in Europe . The returns of certainly come in from where they were but.
You know, where we're hoping that'll be.
A little bit of a transition period as we enter 2022.
Great great. Thanks, a lot.
Our next question comes from my cute too please.
Yeah. Thanks, good afternoon, the market share repurchase Ooh Hello, Yeah Jerry.
The share repurchase.
What's your sent on you know how motivated you're gonna be should we expect that that 150 million should be.
Pursued pretty aggressively how am I to frame that up.
I think given the environment. We're in now and the fact that we think that they were gonna have portfolio opportunities and particularly in the U S. As the your bills. We're we're probably not gonna be as hard on the gas with the program as we were the latter part of last year.
But beyond that I appear here.
Give you a specific guidance.
And then how about the you talked about.
The collections ratio being a deficiency ratio being.
Not quite as good in part because of the liquidity, probably lower liquidity, which makes sense, but I'm just sort of curious if you can.
Describe what you've seen lately, obviously you had.
Cause it kind of ramped up and there's no receding you know with some of the government spending.
Or other supports.
Transitioning let's say in it.
You can say about the about that liquidity about the collections environment as you see it shaping up this year.
Well I think you know we kind of talk through the.
The last couple of quarters about the fact that we expected things to start to normalize the farther and farther we got away from Lockdowns in stimulus and we are we are seeing that so we're you know as we go into.
2022 were expecting a more normalised level of of collections in line with our <unk> forecasts and.
As a result, I think the most recent trending of.
Cash efficiencies, what we you know as I said in my prepared remarks, what we expect to kind of carry into 2022.
If I could if I could add to that.
Mark if I could add to that you know pizza prepared comments.
Just to put a pin in it a little bit you know the record. The the numbers were forecasting are still quite a bit higher than our pre COVID-19 levels and I think that this this idea of all of this that we've learned and developed over the past couple of years is gonna stick with us and that's gonna benefit us down the road.
Understood and then the M&A do I hear slightly more enthusiasm in your voice about about potential M&A and could you give us a little more on what you might be looking at.
Yeah, I thought I laid it out pretty good in the script you know but.
Yeah, you hear a little more enthusiasm for me that's for sure I think it's it's an interesting time for it.
You know I talked about adding new skill sets new capabilities.
That's one thing and it back talked about kind of a normal blocking and tackling of of getting into getting new data. It's always a big thing in our industry getting new seller relationships to some degree.
Or potentially new geography, so that I can.
Covers most of the areas that we're thinking about right now.
Yeah, and then just one final one you're talking about the pursuing new asset classes it sounds like you're.
Penetrating are you you're in a new asset class and it's you're waiting for it to build before.
Giving some additional disclosures is that the right way to think about it.
Absolutely Yeah. It's you know we call them, we call them tuition investments and you know, we'll we'll pick off these asset classes to see what we know about them and how they track in and separate way into it's pretty consistent approach we've taken over the years, but.
If you think about again much like I said, you know M&A. The timing is good timing is also good for this kind of exploration as well I don't know that I don't know that 2020 and 2021.
Would have necessarily been that time, you drink COVID-19 , but where we're at that point, we're excited about it.
Thank you.
Our next question comes from Robert Dot Raymond James. Please go ahead.
[noise], Hello, and congratulations on the him and only him Christian seem cause that's within the last couple of yes on one question for us on the the the buyback I presumed the amount is more or less.
Payment by the covenants in the credit facility.
Is that the cost would be.
Do those covenants limits any your flexibility on either M&A or you know all the all the new products portfolios that you're acquiring of those pledge eligible for the credit officially a really any restrictions the.
The the that come into play.
In terms of how you might allocate capital beyond them to justify that.
Sure. So first part of your question around the covenant limits.
The the new program is well within.
The covenant limits, which are.
Broadly $150 million plus 50% of the prior year's net income.
So that would put us.
Similar to actually a little higher than the levels that we had in the in the program last year.
So we've got ample room, if if the situation develops and makes sense for us to do more we've got plenty of flexibility within the covenant limits in the in the credit facility.
In terms of emanate you know, there's there's buckets within the credit facility that sort of outline those availability as well as some encouraged and current space things.
You know with the with the Unscarred Buzz that we have out but you know, they're all manageable and.
You know given the low leverage position that we're at a conservative nature of the balance sheet, we've got plenty of flexibility to as I said in my bird remarks, deploy capital and a pretty balanced way across all three of those avenues.
Got it got it. Thank you on the the the cost to collect I mean.
They cleared the queue for number hopefully that's sustainable number I mean, I I presume, there's still improvements you couldn't you can.
You can generate some from digital efficiency et cetera may I think that he had <unk> cash collected what's up.
14%, but some of that stinky and hence consumer liquidity.
That may be in.
Yeah. I mean is is that the 63.5, because you've kind of reached S. Steady state efficiency. You you think that all tools to increase efficiency, but then the offset by the fact that consumer liquidity in excess collections maybe.
<unk> <unk> you may not be generating the same amount <unk> access code.
Collections into 2022.
Well, there's there's a couple of things sort of wrapped up in there. So you know part of the challenge we've got is.
Moving past the sort of pandemic induce consumer liquidity and so we want to get.
Get some time under under our belts with regards to performance in a post pandemic world. That's one I think the other factor here is we're down pretty significantly in terms of total collectors in the in the U S. We've still got.
A good amount of.
Slack in the system, but we're not really interested in going much lower in terms of total collectors, even though we've had you know kind of lower levels of portfolio investment over over the last year or so so I think there's capacity for us to build.
As as investment opportunity comes.
Through 2022 for us to build and and layer those portfolios on without significantly impact and cost space and that will that will obviously drive additional impact on the cash fish inspiration.
Got it thank you want one husky.
Housekeeping matter, if I can on your sensitivities that televising rates I think.
From what I was Coca Cola looking at Pulaski I mean, you hedged the the.
The the vast majority of of your floating light exposure. So would you say that I should expect that.
<unk> sensitivity to be to the minimal does that sir.
Yeah, I mean, we.
We largely historically have been.
Funded through the secured credit facilities withdrawal floating rate.
We've done some some interest rate hedging.
Overtime, we've now layered in fixed rate that exposure in the context of the unsecured bonds.
Uhm I'd say are are sort of natural posture as neutral so call at 50%, but at times will be.
Hedged higher than that probably won't be much lower than that at the end of the year, we were roughly 68%.
Effectively hedged the combination of those.
You know those fixed fixed rate debt issuances as well as the as well as the hedging program.
Got it thank you mhm.
Hmm.
Okay, you'd like to ask a question. Please press tie then one.
Next question is a follow up tin Dot Napoli, let's see.
Hi.
Thank you I just to be clear I think the the sanctions that are flying around.
Over the last couple of days is there any effect on.
On your business from from any of those sanctions and paint.
Payments or.
In any way.
Can I can just take it a step further and when you called out in your your poll from Poland. Your employees in Poland and is there any disruption within your organization in any way.
At this point.
So I guess I'll say that.
On the sanctions I don't I don't think there's any impact to us. We don't we wouldn't have any involvement in any of those kind of things and the Poland situation is just that you're so many refugees coming across the border I I think I heard and 600000 ish and about half were coming into Poland.
I guess I'll share with you some of our employees personally have I've I've taken in folks from Ukraine. So that's a sensitivity to have that it's really about it's really about the.
I I would say the.
The the.
The personal impact from our employees, but.
But that's it yeah nothing nothing on a on a financial side.
Thank you.
And then just you know, giving out a stat and I make sure I got this right $1.6 billion in cash collections. That's from the E. R. C that you had at the end of the year is what.
You're suggesting 2020 can cash collections 1.6 billion from E. R. C. And then obviously collections from purchases on would be on top of that.
Yeah, and then to the extent, we have any overperformance against the projections that would be active as well so.
So it's it's basically just the back book.
The next 12 months of the ERC projection of 6 billion is 146.
Okay.
Thank you and then I think you had.
<unk> may be suggested some tweaks tier that structure.
Are there what are you are there ways to I mean, there's averages relatively low where you're looking at.
You know converts or you know their way too and give you more permanent loss or a long-term capital. It gives you more flexibility for either M&A or share repurchases or or that purchases.
Yeah, we've been on kind of a long term multiyear journey of rebalancing, our our funding profile.
Uhm It started with getting rated in in 2020.
And we've done now too two unsecured.
Issuances in the in the U S market.
And and so we'll continue.
To to work work down that journey and you know the European market is one that.
Is for our sector actually a very liquid market and a lot of investor interests. So that's that's probably a logical and.
Sort of place for us to look next.
And what does that does that gates would you take up your target average ratio slightly no. It doesn't it doesn't really have an impact on the leverage ratio per se. It. It gives us an ability to to turn out the maturity profile.
And and you know at the margins.
You know increasing our level of unsecured funding versus secured funding will be.
Credit credit enhancing from perspective of the rating agencies.
Alright.
Thank you.
Yep.
This concludes that question and answer session I would like to turn the conference back over to Kevin's Stevenson Friday closing goodbye.
Yeah. Thank you operator, and and thanks, everyone for joining us a call at a call. This evening and I do want to I I really do want to end here, where I started these are trying times for the world from Covid to what's happening in your you Ukraine.
Is there a time that we really got to pull together as a global community and support those who need it the most and I just urge you I urge everyone to call don't sit on the sidelines and get involved show your support send your support and help those folks need and with that of course, we look forward to talking to you next quarter. Thank you.
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