Q3 2023 PRA Group Inc Earnings Call

Good afternoon, and welcome to the PRA group's third quarter 2023 conference call.

Speaker 1: Good afternoon and welcome to the PRA Group's third quarter of 2023 conference call. All participants will be in

All participants will be in listen only mode.

Speaker 1: Should you need assistance? Please signify a conference specialist by pressing the start keys followed by Z-Rail.

Should you need assistance. Please signal a conference specialist by pressing star followed by zero.

After todays presentation, there will be an opportunity to ask questions.

Speaker 1: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touchtone phone. To withdraw your question, please press star then two.

To ask a question you May Press Star then one on your Touchtone phone.

To withdraw your question. Please press Star then two.

Please note this event is being recorded.

I would now like to turn the conference over to Mr. Jamie Dimon.

Speaker 1: I would now like to try the conference over to Mr. Nijane Muslim and his president of Investor Relations for PRA Group. Please go ahead.

As president of Investor Relations for PRA Group. Please go ahead.

Okay.

Speaker 2: All right, thank you. Good evening everyone and thank you for joining us. With me today are Vic Atal, President and Chief Executive Officer and Rakesh Sikhal, Executive Vice President and Chief Financial Officer.

Alright, thank you.

Thank you everyone and thank you for joining US with me today are Vic I'll call, President and Chief Executive Officer, and Rakesh, Sickle Executive Vice President and Chief Financial Officer.

Speaker 2: We will make forward looking statements during the call, which are based on management's current beliefs, projections, assumptions, and expectations.

We will make forward looking statements during the call, which are based on management's current beliefs projections assumptions and expectations we have.

Speaker 2: We assume no obligation to revise or update these statements.

No obligation to revise or update these statements.

Speaker 2: precaution 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.

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.

Speaker 2: Please refer to the earnings press release and RSEC filings for a detailed discussion of these facts.

Please refer to the earnings press release, and our SEC filings for a detailed discussion of these factors.

Speaker 2: The earnings release, the slide presentation that we will use during today's call, and our SEC filings can all be found in the Investor Relations section of our website at www.pragrub.com.

The earnings release, the slide presentation that we've always used during today's call and our SEC filings can all be found in the Investor Relations section of our website at Www Dot PRA group Dot com.

Speaker 2: Additionally, a replay of this call will be available shortly after its conclusion, and the replayed island information is included in journeys, press release.

Additionally, a replay of this call will be available shortly after its conclusion and the replay dial in information is included in the earnings press release.

Yes.

Speaker 2: All comparisons mentioned today will be between Q3 2023 and Q3 2022, a much otherwise noted, and our America's results include Australia.

All comparisons mentioned today will be between Q3 2023 in Q3 2022, unless otherwise noted and our Americas results include Australia.

Speaker 2: During our call, we will discuss Existed EBITDA and debt to Existed EBITDA for the 12 months and did September 30th, 2020-30 in December 31st, 2022.

During our call, we will discuss adjusted EBITDA and debt to adjusted EBITDA for the 12 months ended September 32023, and December 31 2022.

Please refer to today's earnings release, and the appendix of the slide presentation, you're starting this call for a reconciliation of the most directly comparable U S. GAAP financial measures and these non-GAAP financial measures and with that I'd now like to turn the call over to Vic a tall or <unk>.

Speaker 2: Please refer to today's earnings earlys and the appendix of the slide presentation used during this call for a reconciliation of the most directly comparable US GAAP financial measures to these non- GAAP financial measures.

Speaker 2: And with that, I'd now like to turn the call over to Vika Tull, our president and chief executive office.

And Chief Executive Officer.

Speaker 3: Thank you, Nijim, and thank you for everyone for joining us this evening.

Thank you Jim and thank you for everyone for joining us this evening.

Speaker 3: In a few minutes, I will pass the bet on to Rakesh to cover the financial section of our chart.

In a few minutes I will pass the baton onto Rockies to cover the financial section of our quarterly results.

Speaker 3: Prior to doing so, however, I feel that it is important for me to provide a link between the results we are reporting today, which closely parallel our prior expectations. And the confidence I have in the results we expect to realize over the next 12-18 months.

Prior to doing so Hollywood I feel that is important for me to provide a link between the results. We are reporting today, which close keep out of our prior expectations.

Confidence I have in the results, we expect to realize over the next 12 to 18 months.

We believe these future results will be driven by a combination of portfolio of supply pricing operational effectiveness and efficiency.

First portfolio of supply and pricing.

The chart on the upper deck provides a quarterly investments in Europe stretching back two years.

Speaker 3: The chart on the upper left profiles are quarterly investments in Europe stretching back three years.

Speaker 3: As you can see, purchasing levels vary throughout the year.

As you can see what you think levels vary throughout the year.

Speaker 3: This is due to the mix of spot transactions versus forward flows in the region, but the overall picture indicates relatively stable averages continuing into this year.

This is due to the mix of spot transactions versus forward flows in the region, but the overall picture indicate relatively stable averages.

If you're doing into this year.

Despite the competition in Europe, we continue to benefit from our deep relationships with sellers.

Speaker 3: Despite the competition in Europe , we continue to benefit from our deep relationships with sellers to maintain investment levels and renew important forward flow agreements.

Maintain investment levels and when new important forward flow agreements.

Moving across to the jargon, but right. The U S picture shows a correlation between the overall industry credit card charge off rates and our portfolio purchases.

Speaker 3: Moving across to the chart on the right, the US picture shows the correlation between the overall industry credit card charge of rates and our portfolio purchases.

Speaker 3: We believe these recent trends will continue into 2024, providing clear opportunities for us to benefit from this important deal with.

We believe these recent trends will continue into 2024, providing opportunities for us to benefit from this important bandwidth.

Yeah.

Peter it's worth pointing out that along with the growth in volume was the return on our new button says have improved over recent quarters and a substantial majority of our forward flows are now priced to reflect the current.

Speaker 3: It is worth pointing out that along with the growth in volumes, the returns on our new purchases have improved over recent quarters, and a substantial majority of our forward flows are now priced to reflect the current macroeconomic conditions and funding environment.

Macroeconomic conditions and funding environment.

Speaker 3: Because these increased volumes and returned profiles of fairly recent developments.

Because these increased volumes and return profiles are fairly recent developments.

Speaker 3: They have not yet flowed through our current results to any meaningful extent.

Mark you had flowed through our current results to any meaningful extent hi.

Speaker 3: However, we expect for this dynamic to positively influence cash collections and revenues through 2024 and beyond.

Hi, well, we expect this dynamic to positively influence gas connections and revenue was through 'twenty 'twenty four and beyond.

Yeah.

Next operational effectiveness.

As I have referenced on previous calls it is essential for us to not only focus on the front end of our business, but you're seeing portfolios at attractive returns, but also to optimize the value from our back book.

Speaker 3: And I have referenced on previous calls. It is essential for us to not only focus on the front end of our business purchasing portfolios at attractive returns, but also to optimize the value from our backpork.

Therefore from my very first week as CEO I have been punished and challenge our team to evaluate and enhance our operational effectiveness.

Speaker 3: Therefore, from my very first week of CEO , I have encouraged and challenged our team to reevaluate and enhance our operational effectiveness. They have...

They have responded superbly.

Speaker 3: Over the past six months, we have identified, tested, and begun rolling out a wide range of cash generating initiatives, both large and small to address our performance in the US.

Over the past six months, we have identified.

And began rolling out a wide range of gas generating initiatives, both large and small to address our performance in the U S.

Some of these initiatives include enhancements to our legal collection activities, where we are identifying new information sources to optimize the value and decision making processes across this important channel.

Speaker 3: Some of these initiatives include enhancements to our legal collection activities, where we are identifying new information sources to optimize the value and decision-making processes across this important channel.

Speaker 3: We are also leveraging additional third party resources to bolster and accelerate our post judgment customer interaction.

We are also leveraging additional third party resources to bolster and accelerate our post judgment customer interactions.

Speaker 3: Both sets of initiatives have identified significant opportunities that are now migrating into execution mode.

Both sets of initiatives have identified significant opportunities there right now.

Now migrating into execution mode.

Similar efforts are being made with the non U S call center operations with correspondingly encouraging opportunities.

Speaker 3: Similar efforts have been made with the United U.S. call center operations with correspondingly encouraging opportunities.

Speaker 3: We implemented a wide range of operational strategy announcements starting in the second quarter.

We implemented a wide range of operational strategy and Osborne starting in the second quarter.

Speaker 3: expanded these in the third quarter and are rolling out further initiatives this quarter.

Expanded these in the third quarter and are rolling out further initiatives this quarter.

Speaker 3: These changes are driving increased customer contact rates and more effective customer interactions leading to a growth in payment plans. And you have cash collections performance that has modestly outperformed our internal expectations over the past six months.

These changes are driving increased customer contact rate and more effective customer interactions needing to our granted payment plans and U S. Cash collections performance that has modestly outperformed our internal expectations over the past six months.

Speaker 3: Due to the time lag between the actions being taken and the impact on cash generation, particularly within the legal channel, but also extending into the call center, the effect of these initiatives and enhancements are only minimally reflected in our year-to-date results.

Due to the time lag between the actions being taken and the impact on cash generation, particularly within the legal channel, but also extending into the call center. The effect of these initiatives and enhancements are only minimally reflected in our year to date results.

Finally efficiency.

Speaker 3: Our relative underinvestment in platform and system upgrades will be a focus of ours in the time to come.

Relative under investment in platform and system upgrades will be a focus of ours in the time to come.

Meanwhile, in the near term.

Speaker 3: Meanwhile, in the near term, there are tangible opportunities for us to improve our efficiency that don't require complex changes to our core architect.

What opportunities for us to improve our efficiency that don't require a complex changes to our core architecture.

Speaker 3: Over the past six months, we have instituted initiatives that are improving the cause and productivity and optimizing our side footprint in the US.

Over the past six months, we have instituted initiatives that are improving call center productivity and optimizing our site footprint in the U S.

Speaker 3: We have also piloted multiple programs with third parties to leverage lower cost locations to support both boys and that across.

We have also piloted multiple programs with third parties to leverage lower cost locations to support both voice and data processes.

Speaker 3: The rollout of these programs has commenced in the current quarter. With an expectation that we will expand these over the next 12 to 18 months.

The rollout of these programs has commenced in the current quarter with an expectation that we will expand these over the next 12 to 18 months.

Speaker 3: While growth in account volumes and expanded legal processes suggest a corresponding increase in expenses, we believe these anticipated higher expenses will be largely offset by the efficiently initiatives underway.

While growth in account volumes and expanded legal processes suggest a corresponding increase in expenses. We believe these anticipated higher expenses will be largely offset by the efficiency initiatives underway.

Speaker 3: In other words, growth in cash collections is expected to outpace our growth in operating expenses over the near term.

In other words growth in cash collections is expected to outpace our growth in operating expenses over the near term.

Speaker 3: This should position us to march towards and improve cash efficiency ratio into the low sixties level.

This should position us to Moscow book improved cash efficiency ratio into the low sixties level.

Speaker 3: with growing portfolio supply, improved pricing, increased operational effectiveness in the US, and robust efficiency measures, we believe we have clear line of sight to deliver significantly improved financial performance in 2024 and beyond.

With growing portfolio of supply improve pricing increased operational effectiveness in the U S and robust efficiency measures. We believe we have clear line of sight to deliver significantly improved financial performance in 2024 and beyond.

Speaker 3: The speed, scope, and impact of the efforts underway have far exceeded my initial expectations.

The speed scope and impact of the effort underway has far exceeded my initial expectations were.

Speaker 3: We recognize the need to deliver results for our shareholders and we will not let up the place at which we are working to achieve this.

Recognize the need to deliver results were actually had hurt us and we will not let up the pace at which we are working to achieve this with.

Speaker 3: With that, it's over to Rakaish for a review of our quarterly results.

With that it's over to Rakesh for a review of our quarterly results.

Thanks, Mike.

Looking at our investments this quarter.

Speaker 4: Looking at our investments this quarter, he purchased $311 million self-portfolio.

$311 million of portfolios.

Speaker 4: Up 70% year over year, this level of investment was driven by increased forward flow volume.

Up 70% year over year. This level of investment was driven by increased forward flow volumes.

Speaker 4: Purchases from new sellers for PRA and a few spot transactions that were higher than anticipated. Given the

Purchases from new sellers for PRA.

In a few spot transactions that were higher than anticipated.

Given the strong investment levels to date.

Speaker 4: diverse geographic footprint across the Americans in Europe and the healthy pipeline of portfolios for sale. We are well on track to achieve over $1 billion in portfolio investments in 2023. A feat we have achieved since

Our diverse geographic footprint across the Americas, and Europe, and a healthy pipeline of portfolios for sale, we are well on track to achieve over $1 billion a portfolio of investments in 2023.

Our feet, we have achieved since 2019.

Speaker 4: This demonstrates our ability to capitalize on industry tailwinds as credit normalize.

This demonstrates our ability to capitalize on the industry tailwind.

Credit normalizes.

We are especially pleased that these recent investments are being achieved improved prices and returns.

Speaker 4: We are especially pleased that these recent investments are being achieved at improved prices and returns.

Speaker 4: Compared to the 2020 to 2022 time period.

Back to the 2022 2022 time period.

Yeah.

In the Americas, we invested $232 million in the quarter, which represented the highest quarterly level of purchasing since 2017.

Speaker 4: In the Americas, we invested $232 million in the quarter, which represented the highest quarterly level of purchasing since 2017.

Speaker 3: We are highly encouraged by the US market with investment levels increasing for the fourth consecutive quarter. As volumes and

We are highly encouraged by the U S market with investment levels increasing.

For the fourth consecutive quarter.

As volumes and pricing continued to improve.

Speaker 4: This should have a positive impact on portfolio income, which demonstrates the significant opportunity ahead of us as we move further into the credit cycle.

They should have a positive impact on portfolio income, which demonstrates the significant opportunity ahead of us as we move further into the credit cycle.

Speaker 4: You can see prices improving by the purchase price multiple expansion in our 2023 America's Core Vintage, which was initially reported at 1.75 times at the end of the first quarter, but has since grown to 1.9 times year to date at the end of the third quarter.

You can see prices improving by the purchase price multiple expansion in our 2023 Americas core vintage which was initially recorded at 175 times at the end of the first quarter, but has since grown to one nine times year to date at the end of the third quarter.

Okay.

In our existing U S. Workflows are fresh paper, we once again experienced a sequential increase in volume from the prior quarter.

Speaker 4: In our existing US workflows of fresh paper, we once again experienced a sequential increase in volume from the prior order.

As mentioned earlier.

Speaker 4: Our forward floor agreements now largely reflect the higher interest rate environment and should generate returns exceeding recent advantages.

Our fourth floor agreements now largely reflect the higher interest rate environment.

And should generate returns exceeding recent vintages.

At a macro level active credit card balances in the U S have exceeded $1 billion up from roughly $850 billion pre pandemic.

Speaker 4: At a macro level, active credit card balances in the US have exceeded $1 trillion. Up from roughly $850 billion, pre-pandemic.

Charge off rates are also trending higher reaching three 2% with size of continued credit normalization from pandemic era at Lowe's, suggesting a continued tailwind.

Speaker 4: Charge of rates are also trending higher, reaching 3.2% with signs of continued credit normalization from pandemic era lows, suggesting a continued tailwind.

Moving to Europe.

Our European business continues to capitalize on stable investment volumes.

Speaker 4: Our European business continues to capitalize on stable investment volume.

Speaker 4: As many of you know, Europe is more of a spot-driven market and generally experiences lower volumes of supply in Q3, which is reflected in this quarter's investment of $79 million.

As many of you know Europe is more of a spot driven market and generally experiences lower volumes of supply in Q3, which is reflected in this quarter's investment of $79 million.

Speaker 4: In the markets where we do have forward flows, the volumes remain stable and I've yet to show an increase. So your

In the markets, where we do have forward flows the volumes remained stable and I've yet to show an increase.

The European market continues to be competitive and.

Speaker 4: And as we have done in the past, we are being very disciplined, ensuring that returns are appropriate.

As we have done in the past we are being very disciplined ensuring that returns are appropriate.

Speaker 4: For example, we are observing that price discovery is in process in certain countries.

For example, we are observing that price discovery is the process in certain countries.

We saw portfolio is brought to market earlier this year that did not meet the sellers internal pricing thresholds and work bolt.

Speaker 4: We saw, quote, full unions brought to market earlier this year that did not meet the sellers in tunnel pricing thresholds and were pulled.

Speaker 4: Some of these portfolios have since come back to market and we have purchased them and improved levels of return.

Some of these portfolios have since come back to market.

And we have purchased that improved levels of return.

Moving on to financials.

Speaker 4: Total revenues were $216 million for the quarter.

Total revenues were $216 million for the quarter.

Total portfolio revenue was $212 million with portfolio income.

Speaker 4: Total portfolio revenue was $212 million with portfolio income of $199 million and changes in expected recovery of $22 million.

<unk> hundred $19 million and changes in expected recoveries of $22 million.

Following a period of declines portfolio income has been stable for the past several quarters.

Speaker 4: Following a period of declines, portfolio income has been stable for the past several quarters.

Speaker 4: And we now believe we are conditioned for growth based on expanding volumes and improved prices.

And we now believe we are positioned for growth based on expanding volumes and improved pricing.

Yeah.

During the quarter, we collected $18 million in excess of our expected recoveries.

Speaker 4: During the quarter, we collected $18 million in excess of our expected recovery.

Speaker 4: exceeding our expectations on a consolidated basis by 4%.

Exceeding our expectations on a consolidated basis by 4%.

Speaker 4: with the Americas overperforming by 3% and Europe overperforming by 6%.

The Americas over performing by 3% and Europe over performing by 6%.

Speaker 4: Operating expenses for the third quarter were $173 million, which were consistent with the prior year period.

Operating expenses for the third quarter were hundred and $73 million, which were consistent with the prior year period.

Speaker 4: Of notes, this number includes a non-tash impairment charge of $5 million related to our previously announced decision to see call center operations at one of our own regional facilities in the US.

Off note. This number includes a noncash impairment charge of $5 million related to our previously announced decision to cease call Center operations at one of our owned regional facilities in the U S.

Speaker 4: Agency fees were up $4 million this quarter, primarily due to higher cash collections in Brazil.

Agency fees were up $4 million this quarter, primarily due to higher cash collections in Brazil.

Speaker 4: Our legal collection costs were $21 million for the quarter, which were down $3 million from the prior year period.

Our legal collection costs were $21 million for the quarter, which were down $3 million from the prior year period.

Speaker 4: We would like to reiterate our expectation for legal collection costs to be in the low to mid $20 million range in Q4.

We would like to reiterate our expectation for legal collection costs.

In the low to mid $20 million range in Q4.

Okay.

Our cash efficiency ratio was 58, 9% for the third quarter, which was up slightly from the prior year period.

Speaker 4: Our cash efficiency ratio was 58.9% for the third quarter, which was up slightly from the prior year period.

We expect the cash efficiency ratio.

Speaker 4: We expect the cash efficiency ratio to remain relatively stable for the fourth quarter.

Remain relatively stable for the fourth quarter.

Net interest expense for the third quarter was $49 million.

Speaker 4: Net interest expense for the third quarter was $49 million, and increase of $17 million.

An increase of $17 million.

Speaker 4: primarily reflecting higher debt balance and increased interest rates.

Primarily reflect a higher debt balance and increased interest rates.

Speaker 4: We expect net interest expense to be in the most $50 million range for the fourth quarter.

We expect net interest expense to be in the low $50 million range for the fourth quarter.

Yeah.

Our effective tax rate for the quarter was negative 28%.

Speaker 4: Our effective tax rate for the quarter was negative 28 percent.

Speaker 4: Looking at the full year, we expect an effective tax rate in the low 20% range.

Looking at the full year, we expect an effective tax rate in the low 20% range.

Net loss attributable to PRA was $12 million or negative <unk> 31 cents.

Speaker 4: Net law attributable to PRA was $12 million on negative 31 cents in diluted earnings per share.

Diluted earnings per share.

Speaker 4: This includes a 10-centre-sense-for-share impact from the non-cash impairment I mentioned earlier.

This includes 810 cents per share impact from the noncash impairment I mentioned earlier.

Speaker 4: Cash collections for the quarter were $420 million, compared to $412 million in the third quarter of 2022.

Cash collections for the quarter were $420 million compared to $412 million in the third quarter of 2022.

The 2% increase a 1% decrease on a constant currency basis was primarily due to higher collections in Brazil, and Europe, which were partially offset by lower collections in the U S.

Speaker 4: The 2% increase or 1% decrease on a Compton currency basis was primarily due to higher collections in Brazil and Europe , which were partially upset by lower collections in the US.

Speaker 4: During 2022, we were witnessing neurobeautic lines compared to 2021.

During 2022 we were witnessing year over year decline compared to 2021.

Speaker 4: due to excess consumer liquidity during the pandemic era.

To access a shame on liquidity during the pandemic era.

The year over year decline has now stabilized and we expect this positive momentum to continue to build into 2024.

Speaker 4: The year over your decline has now stabilized and we expect this from positive momentum to continue to build into 2024.

Speaker 4: For the quarter, America's cash collection decreased 2%, or 3% on a constant currency basis.

For the quarter Americas cash collections decreased 2%.

3% on a constant currency basis driven.

Driven primarily by the impact of lower levels or will be.

Speaker 3: Tribbed primarily by the impact of low levels of portfolio purchases in the US.

Your purchases in the U S.

Over the last few years.

Speaker 3: America's cast collections modestly exceeded our internal expectations for the court.

Americans cash collections modestly exceeded our internal expectations for the core.

European cash collections for the quarter increased 9% or 2% on a constant currency basis.

Speaker 4: European cash collections for the quarter increased 9% or 2% on a constant currency base.

Our year to date cash performance versus our expectations at December 31st 2022.

Speaker 4: A year-to-date cash performance loses our expectations at December 31st, 2022, as experienced 5% open performance in Europe .

Experienced 5% over performance in Europe and.

Speaker 4: and 3% underperformance in the Americas or 1% overperformance on a consolidated basis.

And 3% underperformance in the Americas, a 1% over performance on a consolidated basis.

Let me give you a little more color on what we're seeing with our customers.

Speaker 4: Let me give you a little more color on what we're seeing with our customer.

Yeah.

There has been a lot of discussion in the news lately regarding pressure on the consumer.

Speaker 4: There has been a lot of discussion in the news lately regarding pressure on the consumer.

We have seen limited evidence to date that such pressure is impacting our U S customers.

Speaker 4: We have seen limited evidence today that such pressure is impacting our US customer.

Speaker 4: You're today, we've seen it our cash collection expectations, particularly in our older vintage.

Year to date, we see that our cash collection expectations.

Particularly in our older vintages.

Speaker 4: In Europe , we have seen that the cost of living is having some impact on consumers in a few of our markets.

In Europe, we have seen that the cost of living is having some impact on consumers and a few of our markets.

Speaker 4: In these markets, we have observed fewer large one-time payments.

In these markets, we have observed fewer large one time payments.

Speaker 4: However, the proportion of customers paying us has remained stable. So we think that this will cause a timing delay instead of an overall reduction in cash collection.

However, the proportion of customers paying us has remained stable.

So we think that this will cause a timing delay.

Set up an overall reduction in cash collections.

Speaker 4: It's worth noting that the other markets are still performing well and that Europe as a whole has consistently exceeded our internal expectations.

It's worth noting that the other markets are still performing well and that Europe as a whole has consistently exceeded our internal expectations.

Speaker 4: In both markets, it is our experience that economic downturns and increased pressure on the consumer have historically led to a more charge-offs and portfolio supply than more that will then offset the impact to cash collection.

In both markets. It is our experience that economic downturns and increased pressure on the consumer have historically led to a more charge offs and portfolio of supply than more than offset the impact to cash collections.

Speaker 4: CRC at September 30th was $6 billion, which was up 12% compared to $5.3 billion at September 30th last year.

E. R. C. At September 30th about $6 billion, which was up 12% compared to $5 $3 billion at September 30th last year.

On a sequential basis.

Speaker 4: On a sequential basis, ERC increased more than $70 million compared to the private water.

E R C increased more than $70 million compared to the prior quarter.

With E. R C in the U S increasing by $135 million.

Speaker 4: with ERC in the US increasing my $135 million.

You are seeing liquidates over a shorter time frame in the U S.

Speaker 4: ERC liquidates over shorter time frame in the US.

Speaker 4: So it is encouraging to see US ERC increasing.

So it is encouraging to see our U S E R C increasing.

We expect to collect $1 $5 billion off our E. R. C balance during the next 12 months.

Speaker 4: We expected collect $1.5 billion of our ERC balance during the next 12 months.

Speaker 4: It's important to note that this number only reflects the amount we expect to collect on our existing portfolio.

It's important to note that this number only reflects the amount we expect to collect on our existing portfolio.

It does not include the cash we expect to collect from new purchases made over the next 12 months.

Speaker 4: It does not include the cash we expect to collect from new purchases made over the next 12 months.

Based on the average purchase price multiples, we have recorded in 2023.

Speaker 4: Based on the average purchase price multiples we have recorded in 2023.

Speaker 4: We would need to invest approximately $841 million globally over the same timeframe to replace this runoff and maintain current ERC level.

We would need to invest approximately $841 million globally over the same timeframe.

Place this runoff and maintain current E. R C levels.

Speaker 4: With the continued building U.S. supply, we anticipate that we will exceed this level of investment and grow ERC further as we close this year and move into 2024.

With the continued build in the U S supply, we anticipate that we will exceed this level of investment and grow ERC further as we close this year and move into 2020 four.

Okay.

We have a strong capital structure with a debt to adjusted EBITDA leverage ratio of two eight times at September 30th.

Speaker 4: We have a strong capital structure with a deck to adjust and even our leverage ratio of 2.8 times at September 30.

We expect leverage to increase slightly as we continue to deploy capital at favorable returns.

Speaker 4: We expect leverage to increase likely as we continue to deploy capital at favorable return.

Speaker 4: However, a long-term goal is to have a leverage V in the 2-3 times range.

However, our long term goal is to have our leverage to be in the two to three times range.

In all three of our credit facilities, we have deep banking relationships, many of which stretch back over a decade.

Speaker 4: In all three of our credit facilities, we have deep banking relationships, many of which stretch back over a decade.

Speaker 4: In terms of funding capacity, we have $3.1 billion in total permitted capital to draw under a credit facility.

In terms of finding capacity, we had $3 $1 billion in total committed capital to draw under our credit facilities.

Speaker 4: Our bank lines have margins ranging from 235 to 380 basis points over benchmark that provide an attractive cost of capital in this market and give us an advantage.

Bank lines have margins ranging from 235 to 380 basis points over benchmark that provide an attractive cost of capital in this market and gave us an advantage.

As of September 30th we had total availability of $1.3 billion comprised of $278 million based on our current ERC and $1.1 billion of additional availability that we can draw from subject to desktop.

Speaker 4: As of September 30th, we have total availability of $1.3 billion. Compris of $278 million based on our current ERC and $1.1 billion of additional availability that we can draw from subject to debt covenants, including advance rates.

That's including advanced rates.

Yeah.

Given the build and supply we are expecting we believes the capital available under our credit facilities.

Speaker 4: Given the building supply we are expecting, we believe the capital available under our credit facilities.

The cash generated from our business, including the initiatives, Rick mentioned and access to capital markets in both the U S and Europe should position us well to take advantage of where we are in the cycle.

Speaker 4: It's also worth noting that we do not have debt maturing until September 2025.

It's also worth noting that we do not have debt maturing until September 2025.

Looking ahead, our capital allocation strategy remains focused on purchasing portfolios at favorable prices.

Speaker 4: Looking ahead, our capital allocation strategy remains focused on purchasing portfolios at favorable prices.

We have recalibrated, our net which I'm thresholds in light of the higher interest rate environment.

Speaker 4: We have recalibrated our net rich on thresholds in light of their higher interest rate in gardens.

Speaker 4: And we expect to see the positive impact of this in our financial results as we move through 2024.

And we expect to see the positive impact of this in our financial results as we move through 2024.

Speaker 4: That being said, I am very encouraged by the early signs of financial and operational progress in our business and the path that we have laid forward to create shareholder value. Now I'll turn it back to Vex.

That being said I am very encouraged by the early signs of financial and operational progress in our business and the path we have laid forward to create shareholder value.

Now I'll turn it back to Vic.

Thanks Hawkish building on the strong progress we've made in the second quarter third quarter was another step in the right direction.

Speaker 3: Building on the strong progress we made in the second quarter, the third quarter was another step in the right direction. As we continue to capitalize on the growing portfolio supply in the US and execute on our initiative.

We continue to capitalize on the growing portfolio of supply in the U S and execute on our initiatives.

Speaker 3: As far as the next few months and quarter of our concern, we are encouraged by the way the business is heading.

As far as the next few months and quarters are concerned we are encouraged by the way the business is headed.

To recap.

One portfolio purchases and pricing are improving.

Speaker 3: One, portfolio purchases and pricing are improving, supported by the tailwind of increasing portfolio supply in the US, and are strong and diversified positioning across Europe .

Wanted by the tailwind of increasing portfolio of supply in the U S and a strong and diversified positioning across Europe.

Speaker 3: second, operational effectiveness initiatives are in motion and should generate appreciably more cash.

Second operational effectiveness initiatives are in motion and you generate appreciably more cash.

Speaker 3: and finally expenses remain carefully controlled.

And finally expenses remains carefully controlled.

Speaker 3: These developments provide a strong framework to deliver significantly improved results in 2024. And with that, we are...

These developments provide a strong framework to deliver significantly improved results in 2024.

And with that we are now ready for questions.

Yeah.

Yeah.

We will now begin the question and answer session.

Speaker 1: We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a C-YourPhone, please pick up your answer before pressing the key. Let's draw your question.

Ask a question you May press Star then one on your telephone keypad.

If you are using a speakerphone please pick up your handset before pressing the key.

So let's try your question. Please press Star then two.

Speaker 1: At this time, we will pause momentarily to assemble the roster.

At this time, we will pause momentarily to assemble the roster.

Yeah.

And our first question will come from David Scharf JMP. Please go ahead.

Speaker 1: and our first question will come from David Sharfe of JMP. Please go ahead.

Hey, good afternoon, and thanks for thanks for taking my questions and welcome aboard Rakesh for I guess your first the first earnings call.

Speaker 5: Good afternoon and thanks for taking my question.

Speaker 5: Welcome aboard, my guest. I guess you first earnings call.

Thanks.

Speaker 5: Um, thanks, Dale. Sure. So, um, I guess a couple of things, you know, I first wanted to maybe drill down into kind of the purchasing environment and maybe the timing.

Sure So I.

And I guess a couple a couple of things you know I I first wanted to maybe drill down into kind of the the purchasing environment and and maybe the timing.

How this is Hugh you expect this to unfold with respect to your.

Speaker 5: you expect this to unfold with respect to your portfolio returns because obviously

The portfolio returns because obviously.

Speaker 5: The question for investors is, you know, when we see sort of a return.

Big question for investors is you know when we see sort of a return to consistent.

GAAP profitability.

Speaker 5: I believe you would mention that

Hum.

I believe you had mentioned that you know.

Speaker 5: you know the overall collection multiple and therefore the yield i guess it improved closer to one point nine times cumulatively from one point seven earlier in the year

The overall collection multiple and therefore, the yield I guess it improved.

To closer to 1.9 times cumulatively from from 1.7 earlier in the year.

Can you give us a sense of you know for.

Speaker 5: When the weighted average yield on your portfolio is specifically the North American.

When the weighted average yield on your portfolio, specifically, the North American core.

Speaker 5: How long it takes at current pricing levels?

You know how long it takes at current pricing levels.

How long does it take for the weighted average yield to return to 2019 levels because it seems like.

Speaker 5: How long does it take for the weighted average yield to return to 2019 levels? Because it seems like...

Speaker 5: North American Corps was sort of yielding mid to high 40% returns on a gross basis forever until 2020 Then it dropped about 10 percentage points and into kind of gap loss territory and it feels like it needs to get back to That mid to high 40% range which corresponds

North American core was sort of yielding mid to high 40% returns.

On a gross basis forever until 2020.

That it dropped about.

10 percentage points and into kind of GAAP loss territory and it feels like it needs to get back to.

That mid to high 40% range, which corresponds to maybe are anywhere from a 2.1 or 2.4 multiple like like can you walk us through just the timing based on your expectations of purchase volumes.

Speaker 5: for multiple. Like, can you walk us through just the timing based on your expectations of purchase volumes and how long it takes kind of the go?

How long it takes kind of the old stuff to run off.

Speaker 4: Yeah, so sure, that's a great question. So look, the way to think about it, and I'm glad you're bi-prekeeping the US, this is Europe , because...

Yeah. So sure that's a great question. So look the way to think about it and I'm glad you're bifurcate thing U S versus Europe, because the way the the cash comes in from a timing perspective in the U S. It's over a much shorter time period, I would say that most of that.

Speaker 4: The way the cash comes in from a timing perspective, in the U.S. it's over a much shorter time period. I would say that most of the cash comes in in the first college four years.

Cash comes in in the first call. It four years and so that's why what you're seeing is we're very encouraged by the by the multiples we're seeing in 2023 and they between the volumes and the pricing that we're seeing in 2023.

Speaker 4: And so that's why what you're seeing is we're very encouraged, you know, by the, by the multiples we're seeing in 2023 and the between the volumes and the pricing that we're seeing in 2023. What we're going to see is that's going to offset some of the lower volumes and the lower multiples that we saw in the 2021, 2021, 2022 vintage.

And I see is that going to offset some of the lower volumes and the lower multiples that we saw in the 2021 2022 vintages.

Right and I guess for tissue you know just in terms of.

Speaker 5: right it and I guess for Kish, you know, just in terms of expectations for

Expectations for for purchase volumes I mean.

You know.

Is it do we is it mid 'twenty four mid twenties 25, just once again trying to get a sense for.

Speaker 5: Is it mid-24, mid-2025? Just once again, trying to get a sense for how you see this transformation taking place whereby the blended yield on your portfolio, which is what reaches sort of pre-

You know how you see this transformation taking place whereby the blended yield on your portfolio, which is what's you know reaches sort of pre 2020 levels because it seems to be sort of the high you know almost a magical level to return to being a consistent GAAP burner.

Speaker 5: high, you know, almost the magical level to return to being a consistent gap earn.

Yeah. So look a couple of things right. So one is in terms of the purchase multiples that you mentioned so remember that this is happening in the in the latest vintage. This is happening with respect to a different environment, but the interest rates and we are blending towards the one nice thing you can do it.

Speaker 4: Yes, a couple of things, right? So what is in terms of the purchase multiples that you mentioned, so remember that this is happening in the latest vintage.

Speaker 4: This is happening with respect to a different environment but the interest rate.

Speaker 4: And if we are blending towards the 190, when you do the math, you know, as to, when we started the year at 175, so we're obviously writing business at multiple of that tire. And then second is you need to think about some of the initiatives that Vic mentioned.

Matt you know as to when we started the year at 175. So we are obviously writing business at multiple that's higher and then second is you need to think about some of the initiatives backed up big pension. So what we're doing in the short term here over the next 12 to 18 months, where you're going to see the fruition.

Speaker 4: So what we're doing is a short term here over the next 12 to 18 months where you're going to see the fruition.

It is the investment that we're making with respect to how we run the business whether it is internally are leveraging external parties, whether that is data whether that is from a efficiency or a cost effectiveness perspective.

Speaker 4: is the investment that we're making with respect to how we run the business, whether it is internally or leveraging.

Speaker 4: External parties, whether that is data, whether that is from a efficiency or a cost effectiveness perspective.

Speaker 4: And the combination of the two, our expectation is that that's going to drive meaningfully higher numbers on the multiples in the next call it 24 months time frame.

And the combination of the two our expectation is that that's going to drive meaningfully higher.

Number is on the multiples in the in the next call it.

24 months' time frame.

Speaker 4: And so between the offset of the existing book of the last two years, David, and the new initiatives, in our expectation, and that's what we're focused on. Our expectation is that we're gonna create significantly enhanced value on our cash collection.

So between the offset of the existing book of the last two year data and the new initiatives in our expectation and that's what we're focused on our expectation is that we're gonna create significantly enhanced value on our cash collections.

Speaker 5: I got it understood and appreciate the color. Maybe it's a follow-up on that operational side. I know.

Got it understood and I appreciate the color, maybe maybe as a follow up on that operational side I know you.

Speaker 5: reference the US collection center.

Reference the U S collection Center.

Speaker 5: Well down. Are there efforts underway? I mean are

King what wound down is are there.

It's underway I mean are.

Well you know offshore.

Collection.

Speaker 5: collection capabilities being explored either.

Capabilities being explored either.

T R, a zone or or or leveraging third party.

Speaker 4: TRA zone or leveraging third party. Yeah, just to supplement.

Yeah, just to just to supplement.

Speaker 3: you know, Rocketsons, Outline, so they were looking at, you know, we're looking at initiatives, cash generating initiatives in the US, covering both the legal sphere and the non-degal activity. And as I mentioned in my remarks, we are seeing tangible and meaningful opportunities that we are now starting to execute against on course.

Rakesh is outline tool and David were looking at you know we're looking at in this cash initiatives catching really initiatives in the U S covering both the legal steel and the launch vehicle activity.

And as I mentioned in my remarks, we are seeing.

Tangible and meaningful opportunities.

We are now starting to execute against our uncle's.

Speaker 3: With regard to deproaching lower cost locations, I mentioned that too, we are exploring and are rolling out some items this quarter and we'll be exploring piloting other items in the first quarter of next year that extend to both boys and data processes. So you'll be getting more about that as those programs evolve over time.

With regard to leveraging lower cost locations.

I mentioned that too you know we are exploring and are rolling out some items this quarter and we'll be exploring a piloting other items in the first quarter of next year Ah that extend to both voice and data processing. So so you'll be hearing more about that.

As those programs evolve over time.

Got it thank you very much.

Okay.

Speaker 1: The next question comes from Bob Napoli of William Blair. Please go ahead.

Next question comes from Bob Napoli of William Blair. Please go ahead.

Speaker 6: Thank you. Maybe falling along the same line of questioning as David. I think you mentioned getting the cash efficiency ratio into the low 60s. I'm sorry, over what timeframe and what's the visibility to getting there? I think you had mentioned 2024, but just any color on the improvements. I mean, that's a pretty big improvement than the efficiency ratio.

Thank you and maybe following along the same line of questioning is as David I think you mentioned getting the cash efficiency ratio into the low sixties.

Yeah, I'm, sorry over what timeframe and what's the visibility to to getting there I think you had mentioned 'twenty 'twenty four but just any color on the improvements I mean, that's a pretty big improvement in the efficiency ratio.

Speaker 3: Sure, Bob, I'll take that, you know, as Rakesh mentioned in his remarks, we're looking at a fairly.

Sure Bob I think that you know.

As Rakesh mentioned in his remarks, we're looking at a fairly stable cash efficiency ratio for the fourth quarter right and that's cool probably knows that on this call.

Speaker 3: cash efficient duration for the fourth quarter. Right. And that's all.

Speaker 3: probably knows that on the scores, both quarters generally are seasonally sort of softer quarter for cache generation, right? So, and in the first quarter, that's generally been seasonally higher in the US in terms of cache connection. So the cache efficiency ratio might improve, but I think it's asking the question about from a secular perspective, when should we see the lift in the cache efficiency? Um.

There's going to be a seasonally softer quarter for cash generation right, So and <unk> in the first quarter.

That's generally been seasonally higher than the U S. In terms of cash connection so the cash efficiency ratio might improve but I think if you're asking the question about from a secular perspective, you know when should we see the lift in the cash efficiency.

At this point, we're looking at the back end of 'twenty 'twenty four.

Speaker 3: And this point, well looking at the back end of 2024, is when we would start seeing the impact of the higher pricing combined with the initiatives falling into place, and coupled with the expense initiatives that we've got.

When do we start seeing the impact of the higher pricing combined with the initiatives falling into place and coupled with the expense initiatives that we've got that are offsetting some of the natural growth because we need to have in our business for covering expanded volumes and covering.

Speaker 3: that are offsetting some of the natural growth that we need to have in our business for covering expanded volumes and covering potentially more legal activity.

Potentially more legal activity.

Thank you that's helpful and then I guess.

Speaker 6: Look at your stock today. It's trading below tangible book value, and I don't know that if you even go back to the great financial crisis, you stock your PRA never traded below tangible book value. What do you look at the underwriting that you're dealing for the purchases? What type of an ROE do you think you're underwriting to? I mean, what is the target? You must have a

Look at your stock today is trading below tangible book value and I don't know that if you. Even if you go back to the great financial crisis is not good.

PRA never traded below tangible book value.

What do you look at the underwriting that youre dealing for the purchases what type of an ROE do you think your underwriting too I mean, what is that target you must have a.

Speaker 6: It all rolled up and do an ROE. So just then how are you managing the returns on your underwriting what kind of return level are you targeting?

I mean, it all rolls up into an ROE.

So just how are you managing that.

The returns on your underwriting what kind of return level are you targeting.

Yeah, Hey, Bob, it's where cassia muck.

Speaker 4: Yeah, hey, Bob, it's Rakesh. Look, our goal is ultimately create charitable value. So what I will tell you is...

Our goal is to ultimately create shareholder value. So what I will tell you as.

Speaker 4: We obviously look at the gross multiples that you're looking at, but we also have recalibrated our net return trechels, both here in the Americas as well as in Europe . And the new vintages where we originating.

We obviously look at the gross multiples that are that you're looking at but we also have recalibrated our net return thresholds.

Here in the Americas as well as in Europe, and the new vintages, where are we originating is with the idea to make a meaningfully improved return.

Speaker 4: is for the idea to make a meaningfully improved return. This is what we saw in the last couple of years.

It's just what we saw with the last couple of years.

Speaker 4: So I won't get into specific numbers, but we have to short, you know, we are writing at numbers that is going to make us profitable. And to your point, look.

Don't get into specific numbers, but rest assured.

We are writing at numbers that it was gonna make us profitable and to your point look.

Speaker 6: You know, their cash efficiency is a metric that I understand, you know, for your purposes, folks have looked at that.

You know there are cash efficiency efficiency is a metric that I understand you know for your purposes folks have looked at but.

Speaker 6: As all these initiatives are being undertaken, we are looking at our return on investments on each of those initiatives, because we want to spend the money to ultimately make more money and make it in a more cost-efficient manner. So we're looking at different metrics and KPIs internally to ensure, we are delivering shareholders of value over the long term.

All these initiatives are being undertaken we are looking at a return on investments on each of those initiatives because we wanted to spend the money to ultimately make more money in and make it in a more cost efficient manner. So we're looking at different metrics and kpis internally to ensure we are delivering shareowner.

The value over the long term.

Thank you appreciate it.

Okay.

Speaker 1: Next question comes from Robert Dodd of Raymond James. Please go ahead.

Next question comes from Robert Dodd Raymond James. Please go ahead.

Speaker 7: Hi guys, I want to look somewhat, I think, with all the term on that. I think you made some comment about underinvestment in fast form.

Hi, guys.

Somewhat.

I think longer term on it.

Thank you you made some comment about underinvestment in last fall.

Speaker 7: Relative under the investment platform, do you like me to be corrected, but that's a much more complex issue? Can you give us any more? I mean, are we looking at you going to 12, 14 months of all these efficiency initiatives?

Hum.

That's been done that needs to be collected but that's a much more complex issue can you give us any any more color I mean are we.

Are you going to 12 to 18 months the movies. These efficiency initiatives and then that being the Melbourne, a multiyear cycle of a complete platform rebuild or can you give us any any color on what you're talking about there.

Speaker 7: And then they're being another multi-year cycle of a complete platform rebuild. Or can you give us any color on what you're talking about?

Speaker 3: Robert, you know, the first for our priority as I entered this position, was to ensure that...

Robert you don't.

First of all a priority as I as I.

This position was to ensure that.

Speaker 3: you know, we diagnosed, you know, what the devil does and we're addressing it. I do not believe. I can say looking back over the last six.

You know, we diagnosed Oh, you know what.

The Devil does end up and we're addressing it right and I believe I can say looking back over the last six months.

Speaker 3: that we have established that. We have stabilized the business.

I hope that we have established that Oh, we got to stabilize the business. We have launched numerous initiatives to generate revenue, which is a proper focus.

Speaker 3: We have launched numerous initiatives to generate revenues, which are the prop focus.

Speaker 3: And so that's gonna be the priority into the near term. As we do that, we...

That's gonna be the Friday into their speed to the near term.

As you do that.

We are reviewing.

Speaker 3: you know, the status of our underlying systems architecture and and sort of, you know, all of this sort of upgrades that might be required over time. And probably in the next, you know, 12 months, we will start putting some pen to paper with regard to in what priority and in what order we start doing that.

The status of our underlying systems architecture and.

And sort of book you know all of them sort of upgrades that might be required over time and probably in the next 12 months, we will start putting some pen to paper with regard to in what variety and in what order. We can start doing that and that as you know is not a simple exercise that might be you know because it.

Speaker 3: And that, as you know, is not a simple exercise. That might be, you know, take us, you know, to do. But we are going to be very thoughtful about making sure that anything we do is not disruptive to the momentum that we're creating over the next 12 months. Right? And so we will face that in, you know, as necessary. And it is not an impediment, as I mentioned.

Why did you do but we're gonna be very thoughtful about making sure that anything we do is not disruptive to.

The momentum that we're creating over the next 12 months and so we will phase that in you know as a necessary and it is not an impediment as I mentioned.

Speaker 3: to us being able to create your term value in the French.

To us being able to create near term value in the franchise.

If I could just add to that I think you should be encouraged by the fact that we're looking at this in a couple of phases right. We're thinking about what do we need to do in the next 12 months and how do we create that value and have meaningfully improved results in 2024, but sitting here today. We're also thinking about the long term how do we come.

Speaker 4: If I could just add to that, I think you should be encouraged by the fact that we're looking at this in a couple of phases. We're thinking about what do we need to do in the next 12 months?

Speaker 6: And how do we create that value and have meaningfully improved results in 2024?

Speaker 4: But sitting here today, we're also thinking about the long term, how do we create a much more sustainable, thriving business? And that means we need to invest in...

It is more sustainable thriving business and that means we need to invest in some systems and processes, but that's going to be in the longer term, it's a multiyear sisal in investment, but we're already thinking about that and so the idea is to build that vision of where we want to be in the next fault too.

Speaker 4: some systems and processes, but that's gonna be in the long term. It's a multi-year title and investment that we're gonna, but we're already thinking about that. And so the idea is to build that vision of where we wanna be in the next 12 to 18 months.

10 months, and then sitting here today, where do we want to be in the next three to five years.

Speaker 6: And then sitting here today, where do we want to be in the next three to five years?

Got it I appreciate that color. Thank you another one on all of them.

Speaker 7: Got it. I appreciate that, Carl. Thank you. Another one on the...

Speaker 7: Now, I get new, I think you said there was some spot transaction that came in surprisingly large, relative to normal. Are you seeing anything in terms of like, is the market evolving in a way? Do you think those would just get a word off the currencies or do you think?

The market in the U S. I think you said there was some spot trends action that came in a surprisingly large relative to normal I E. Do you are you seeing anything.

Like is the market evolving do you think those are just one off occurrences or do you think.

Speaker 7: There's going to be a greater incidence of spot activity in the future in the US market. Obviously, if there's more volume, that probably would be. But I mean, is it anything unusual about that that you think is...

It's going to be a greater incidence of spot activity and in the future in the U S market, obviously, there's more holding that probably would be better if it isn't it.

Anything on <unk>.

Usual about that you think is.

Speaker 7: really indicating a market change in terms of how some of us been.

Really indicating a market change in terms of how sellers think about it.

Yeah, I think the comment was made more in general versus the U S. So with the start of my remarks, you know we were talking about just appeals are transactions that were higher than anticipated.

Speaker 4: Yeah, I think the comment was made more in general versus the US. So with the start of my remarks, we were talking about just a few spot transactions that were higher than anticipated. And that also includes America, as it was in focus just on the US. And I would just say that in the US, we're very encouraged.

And that also includes America as it wasn't focused just on the U S and I would just say that in the U S were very encourage by the ability of us being able to reprice substantially most of our our board flows to take into account the higher.

Speaker 4: by the ability of us being able to reprise substantially most of our board flows to take into account the higher interest rate environment.

Interest rate environment, do we see spot transaction, yes.

Speaker 4: Do we see spot transaction? Yes, but that comment was made more generally. But I think Robert has been in this comment that in a time when credit card chargeoffs are rising at a fairly rapid clip.

But that comment was made more generally but I think Robert.

There's a comment that in a time when when credit card charge offs are rising at a fairly rapid clip.

And all this will bring.

Speaker 3: That is, we'll bring items to market that are over and above any of their forward to arrangements that they might have entered into, right? And we're seeing certainly having some visibility to that in terms of deals being brought to market.

Items to market that are over and above any of their forward flow arrangements that they might have both entered into right and we're seeing certainly having some visibility.

To that but and.

Terms of abuse being brought to market.

Got it thank you.

Yeah.

The next question comes from Mark Hughes of truly please go ahead.

Speaker 1: Next question comes from Mark Hughes of truest. Please go ahead.

Yeah. Thanks, good afternoon.

Hi, Mark.

Speaker 2: I'm not recaching. Did you give the number, the 22 million change in recovery? Did you break out by the out performance in the quarter versus the expected change in future collection?

Did you give me a number the 22 million change in recoveries could you break out by the outperformance in the quarter versus the expected change in future collections.

Speaker 4: Sure. So the occupant in the quarter was 18 that we mentioned earlier and then 22 of the total so 4 is the difference which is the change in expected future recovery.

Sure. So the outperformance in the quarter was 18 that we mentioned earlier and then 'twenty two isn't the total so for US the difference which is the change in expected future recoveries.

Okay great.

Speaker 8: Okay, great. I miss that. The tax rate for next year, this year, it's in the low 20s. Is that a good bogey for next year or something different?

The tax rate for next year this year, it's in the low twenties.

We had a good bogie for next year.

Thank you.

Yeah, I would just focused right now on now put this out here. So what we're telling you is for Q4 markets through model in a low 20% range will come back to you as we move into 2020 for you know what you should model in for next year.

Speaker 4: Yeah, I would just focus right now on this year. So what we're counting you as for Q4, Mark is to model in a low 20% range. We'll come back to you as we move into 2024, you know, what you should model in for next year.

Okay.

Speaker 8: Okay. If you have any view, you talked about credit normalization. It's interesting to hear your description of the consumer. Your consumer's done seem to be under pressure. How do you view this evolving in other terms?

Many of you are you you talked about credit normalization.

Intra.

It's interesting to hear your description of the consumer your consumers don't seem to be under pressure.

How do you view the evolving you know there's some.

Speaker 8: potential, I think, B of A, talked about normalization, extending for a few more quarters, and then maybe stabilizing. Do you have a view on any of that?

Potential I think Bofa you talked about you know the normalized normalization extending for a few more quarters and then maybe a.

Maybe stabilizing do you have.

The view on any of that.

Yeah, that's right.

Speaker 4: You look obviously the consumers that we have around their own journey that's probably different from the consumers around some of the larger money center banks.

Yeah.

Consumers that we have around their own journey, that's probably different from the consumers.

Around some of the larger money center banks.

Speaker 6: As I mentioned, Mark, earlier in my remarks, we looked at how our consumers are performing and we've seen limited evidence of them being under pressure today in the U.S.

As I mentioned earlier in my remarks, we looked at how our consumers are performing and what we've.

We've seen limited evidence of them are.

Being under pressure today and in the U S.

Speaker 4: We anticipate a cast elections to continue in the in the coming.

We anticipate the cash collections to continue.

In the in the coming quarters, as we engage with them, especially through all the initiatives that we were talking about earlier. So I view this as a tailwind in the sense that as credit normalizes further because some of the remarks made by the banks, whereas they still expect credit to normalize further.

Speaker 6: as we engage with them, especially through all the initiatives that we were talking about earlier.

Speaker 4: So I view this as a tailwind in the sense that as credit normalizes further because some of the remarks made by the banks was...

Speaker 4: They still expect credit to normalize further. Some of them actually are going to reduce that credit cost this quarter. So we view that as a positive from a supply perspective.

Some of them actually you would have reduced that credit cost this quarter.

So we view that as a positive.

From a supply perspective, so all in all between the consumer where they are now.

Speaker 4: So all in all, between the consumer, where they are, and they are our customers today, and the increased supply coming, we view that as a tailwind for others.

They are our customers today and the increased supply coming.

As a tailwind for our business.

And then I think you'd mentioned the new sellers any way to characterize the.

Speaker 8: I think you would mention the new sellers anyway to characterize the pace with existing sellers and what the magnitude of the new sellers are there others that are exploring dead tails as well.

The PE with existing sellers.

You know what the magnitude of the new sellers are there others that are exploring bed sales as well.

Speaker 4: Yes, so look, these are sellers that have been in the market. We just haven't engaged with them previously. So this is a positive for us as we expand the number of sellers from whom we buy and we get on their panels. So we're not, this is not changing our product focus. So it's still looking at the credit card, the PLCC space and the areas that we're in today, and just expanding the number of sellers that we buy from.

Yeah. So I'll, let Scott these are sellers that have been in the market. We just haven't engaged with them. Previously. So this is a positive for us as we expand the number of sellers from.

From whom we buy and we get on their panels and so we're not this is not changing our product for cars. So it's still looking at the credit card. The P. L. T C space and the areas that we're in today and just expanding the number of sellers that we buy from.

Thank you very much.

Yeah.

Speaker 1: The next question is a follow-up from Bob Napoli of William Blair. Please go ahead.

The next question is a follow up from Bob Napoli of William Blair. Please go ahead.

Speaker 9: Thank you for the follow up. Just a bit more commentary on Europe . I mean, it seems that an international player, Australian player talked about a much tougher collections environment, payment plans being canceled or something like that. Another competitor just talked about.

No. Thank you for the follow up just a little more commentary on Europe, I mean, it seems that.

And international player Australian player talked about a much tougher collections environment payment plans being canceled or something like that and you know another competitor just talks about you know how challenging it seems like your European business is doing somewhat better I mean, you've talked about competition, but.

Speaker 9: you know, how challenging it seems like your European business is doing.

Speaker 9: somewhat better, I mean, you've talked about competition, but how do you explain PRA's international commentary versus what we heard at a...

How do you explain P R as international commentary versus when we heard out of.

Speaker 9: The other public company out of Australia and other competitors discussing Europe .

The other public company out of Australia, and other competitors discussing Europe.

There might be a you know it depends on the on the markets in which different players.

Speaker 3: There might be a, you know, it depends on the markets in which different players are present at what I can't comment on, you know, who you're referring to. But, you know, our business is fairly well distributed across Europe with, you know, the Nordics, Poland, UK, and then Southern Europe . And, you know, similar to what RAK-H mentioned.

Our present involved I cant comment on you know, who you're referring to but you know our business is fairly well distributed across Europe with the you know the nordics are falling.

U K and then southern Europe and.

Similar to what Rakesh mentioned, Oh, there might be a market or two where are you know large payments.

Speaker 3: You know, there might be a market or two where you know large payments are impacted But that has not affected the fair rate right so the volume of customers making payments was remains stable even in those markets that

But that has not affected the payout rates rifle the volume of customers, making payments will remain stable even in those markets that it might be experiencing slight people stress and so that has an impact on the timing of cash versus the totality of cash we will generate so we certainly are seeing up.

Speaker 3: that might be experiencing slight remote stress. And so that has a impact on...

Speaker 3: on the timing of cash versus the totality of cash we were generates.

Speaker 3: I'm seeing no particular stress. And as you can see from our results over, many quarters our business in Europe has been performing consistently and consistently well.

No particular stress and as you can see from our results over many quarters our business in Europe has been performing consistently and consistently well.

Thank you <unk>.

Speaker 9: Thank you. The 2021 poll of US America's, you know, is where you've taken the biggest right down. And I think you actually even had maybe a hair of a good improvement into collections and multiple there. Are you comfortable with that poll now? Because in the past, whenever you've had a poll in this industry, generally, you generally get follow up marks, but it seems like you actually took a little bit of a positive mark there.

2021 pool of U S Americas, yes, where you've taken the biggest write down and I think.

We actually even had a maybe a hair of had been improvement in the collections multiple there.

Are you comfortable with that pool now because in the past whenever you've had a poll.

And this industry generally.

And you generally get follow up marks but it seems like you actually took a little bit of a positive mark theirs.

Speaker 9: Is that pool and that pool shrinks? Your returns should go up. But anything commentary on that pool is specific.

That pool when does that hold shrinks your return should go up but anything any commentary on that specifically.

Speaker 2: I think we've talked about that in the past, Bob. There's a fair question just given the, you know, the sort of issues we had with that, with that vintage and we reported that on the first quarter. You know, you know, in terms of

I think we've talked about that on the possible. It's a fair question just given the you.

No.

The issues, we had with that would that be and be reported out in the fourth quarter.

You know.

In terms of.

Speaker 3: the performance on the call center, you know, that's moving along to expectations. As we talked about, we have ramped up our legal activities against that vintage and that just comes through with a slight lag in terms of when it starts taking effect. So at this point in time, we feel that we're in pretty good shape with that vintage and go.

Oh the performance on the call Center.

Moving along to expectation as we've talked about we have ramped up our legal activities against that maintained and that just comes through with a slight lag in terms of when it starts taking effect.

This point in time, we feel that we're in pretty good shape, but they've been ditch and you know where.

Speaker 3: You know, we're tracking it and these initiatives that we've got underway cutting across, you know, every, every vintage of our, of our business. And we should see that impacting the 21 vintage over time as we get through 2024 as well. Yeah. And I think it's a big.

Cracking it and these initiatives have you got underway.

Cutting across you know every every big digital part of our business and we should see that impacting.

The 21 vintage overtime.

As we get through 2024 as well.

Yeah, and if I can say to that.

Just to round it out right. Its revenue recognition, you're asking about you know see seller right under those rules, it's our best estimate with respect to our expectation for cash flows and what you kind of see as variability quarter to quarter.

Speaker 4: You know, just to round it out, right? It's revenue recognition you're asking about, you know, seashell right under those rules, it's our best estimate with respect to our expectation for the cash flows.

Speaker 6: And what you're going to see is variability in quarter to quarter. But I think with encourages us is that over the long term, we have always experienced modest performance, unless it's where we originated. And as you can see, that particular vintage in a quarter to date, you know, we're seeing some positives.

But I think what encourages us is that over the long term, we've always experienced a modest outperformance unless it's wherever you originated and as you can see that particular vintage unit quarter to date.

Great.

We're seeing some positives.

Speaker 10: So, and then the second is also just around the initiative.

And then the second is also just around the initiatives.

Speaker 4: that Big mentioned, we're starting to really focus on that and we should start seeing a better performance coming out of that vintage as these initiative stakeholders.

That <expletive> mentioned, we're starting to really focusing on that and you should start to see.

Better performance coming out of that vintage as these initiatives take hold.

Thank you and if I can squeeze one last one and you had mentioned last quarter outsourcing offshoring as part of your book.

Speaker 9: Thank you. If I could squeeze one last one in, you had mentioned last quarter outsourcing off-shoring as part of your VIC and strategies. Any updated commentary on off-shoring outsourcing?

Vic and strategies any updated commentary on offshoring.

Outsourcing.

Yeah, So I think I I good question, Bob Thank you.

Speaker 3: Yes, I think I have a good question about. Thank you. So I look at how sourcing in two ways. One is leveraging you know, local players in the US market.

So.

I look at outsourcing into.

In two ways one is leveraging.

You know local players in the in the U S market.

Speaker 3: to bolster and accelerate activities that we want to do. And that's that we have actually expanded our sort of engagement levels with some third parties, particularly on the legal front to bolster and accelerate our activities there. That's US based. And then in off-shoring, we piloted a couple of programs in the second quarter.

I'll start and accelerate activities, if we wanted to do and that's what we have actually expanded.

Our oh sort of engagement levels with some third parties, particularly on the legal front.

To bolster and accelerate our activities there that's U S based and then all in and offshoring.

We find that there's.

A couple of programs in the second quarter.

Speaker 3: into the third quarter and now in the fourth quarter we're rolling out programs with a couple of parties and we're in pilot mode with other parties over regard to leveraging lower cost locations and I think the sense is that over the next six to nine months

Into the third quarter and now in the fourth quarter, we're rolling out.

Programs with a couple of bodies and we're in pilot mode.

With other parties with regard to leveraging.

Lower cost locations and I think the sense is that over the next six to nine months we.

Speaker 3: We will validate, and at this point in time, we fully expect that we've positive validation. We will validate that these relationships are working to expectations, meeting our thresholds, and at that point in time, we will have a discussion in turn, we have two.

We will validate and at this point in time, we fully expect that they will be positive validation. We went validate that these relationships are working to expectations.

Got thresholds then at that point in time, we will have a discussion internally as to you know.

Speaker 3: you know, whether we scale them up and at what level. So, based on the last three, four months of activity, we're very encouraged by what we've accomplished. And, you know, as you might recognize, we've been moving at, you know, rapid fire speed on this stuff and to get it done so quickly.

Whether we scale them up and at what level So based.

Based on more based on the last three or four months of activity were very encourage by what people are accomplishing.

You might recognize we've been moving at a rapid fire speed all the stuff I could get it done so quickly.

Thank you.

Speaker 1: The next question is the follow up from David Sharfe of JMP. Please go ahead.

The next question is a follow up from David Scharf JMP. Please go ahead.

Great. Thanks for squeezing me in again, maybe just.

Speaker 5: Great, thanks for rescuing me in again. Maybe just a couple of the end here. One request, just a quick maybe update on...

And here.

Rick It's just just a quick maybe update on them.

The status of kind of loan covenants. So I'm, assuming there is nothing to report, but I know there was kind of a unique situation in Q1, where the company.

Speaker 5: status of kind of loan covenant that i'm assuming there is nothing to report but but i know there was kind of a unique situation Q1 where the company

It's a C code one off covenant relief on the operating income I think it is.

Speaker 5: Is there anything else in your bank facilities, whether it's restricted payments?

Is there anything else in your bank facilities, whether it's restricted payments or.

Coverage ratios or definitional changes that.

Speaker 5: coverage ratios or definitional changes uh... that we ought to be aware of or is everything pretty much that is close and that

We ought to be aware of or is everything pretty much status quo since that Q1 event.

Speaker 5: Yeah, I would just say status quo, right? The Q1 event was NOI and as you could see, you know, our income from operations positive. So no changes there, David. Got it, that's what I thought. And then one last one, circling back to...

Yeah, I would just say it's status quo right. The coupon event was our NOI and that you could see you know our income from operations positive. So no changes there. Okay got it that's what I thought and then one last one circling back to.

Kind of the the the purchasing outlook and supply.

Speaker 5: kind of the purchasing outlook and supply.

Speaker 5: you know the it seems like the last few years you know point through the q the concentration of the companies purchases in private label seems to gotten larger and larger

It seems like the last few years, you know poring through the queue. The concentration of the company's purchases and private label seems to have gotten larger and larger for relative to <unk>.

Speaker 5: over the last three, five, ten years, and instinctively, I think it...

Over the last three 510 years and you know instinctively I think it is.

Kind of harder to collect from lower balance accounts.

Speaker 5: kind of harder to collect from lower balance accounts. You know, as you look at kind of your flow deals and just the overall increase in supply, you know, a lot of people are used to thinking more in terms of the general purpose, you know, pathoclass versus private label. Is your mix changing? Are you engaging with more?

As you look at kind of your flow deals and just the overall increase in supply you know a lot of people are used to thinking more in terms of the general purpose.

Asset class versus private label is your mix changing or are you engaging with more.

Private jet.

Speaker 5: private general purpose auctions and should that matter to us or am I overthinking this?

General purpose auctions and should and should that matter to us or am I overthinking. This.

I.

Speaker 3: I actually am just looking at some data here. I'm not sure.

I actually I'm, just looking at some data here I'm not sure.

You know what you like what Youre tracking to Oh.

Speaker 3: you know, what you're tracking to David, but in our queue, we report out the mix of the portfolios between the major credit cards and private label and actually private label as a percent of our purchases, as actually declined versus a year ago. But I would also say that like the whole notion of private label versus major credit cards has got

David.

In our Q, we report out the mix of the book.

Portfolios between the major cause of private label and actually of private label.

The sin Oh part of our purchases.

Actually declined.

You Gotta go, but I would also say that the whole notion of private label versus major credit cards has gone so.

Speaker 3: So a little bit distorted out of a time because it's a question of really, if you're talking about average balances and thinking that what is the flexibility on our across average balances, we are not seeing a change, material change in the average balances that we're collecting more, right? And in fact, one way that comes up isn't what percent of our accounts are those that we might target, they keep necessarily for legal coverage and that hasn't really changed out of a good partner. Got it.

That's a little bit distorted out over time because you.

It's a question of really if you're talking about average balances and say I'm thinking that you know what is the kind of stability on orthopedics at present, we are not seeing a change material change in the average balance of different connected right and in fact, one way and I know it comes up is and you know what percent of our accounts are odd.

Those that we might target take if necessary for legal coverage and that hasn't really changed over time.

Got it very helpful. Thanks, so much.

Speaker 11: So

Thanks.

Speaker 1: The next question is a follow up from Mark Views of Truist. Please go ahead.

The next question is a follow up from Mark Hughes Truest. Please go ahead.

Yeah. Thank rakesh.

Speaker 8: Yeah, thanks. Rakesh, what is the factor that drives the 1.1 billion in availability? I think you've got subject covenants in advance rates. Could you just maybe expand on that? Is that available under what circumstance it is available?

Uh huh.

Factors that drive the $1 1 billion in availability.

Subject to covenants and advance rates could you just maybe expand on that.

Is that available and under what circumstances would available.

Yeah sure. So look we have committed capital of $3 1 billion, Mark and you know we borrowed seven amounts under the credit facilities.

Speaker 4: Yeah, sure. So look, we have committed capital of 3.1 billion mark. And you know, we borrowed certain amounts under the credit facilities. And so that 1.1 billion that I was mentioning is something that we can draw on, subject to the advanced rates.

So that $1 1 billion that I was mentioning is something that we can draw on subject to the advance rates are better.

Speaker 4: that we have in those facilities as we purchase more ERC. So our advance rates that we've disclosed range anywhere from 35% to 55%. And so we can, as we have fired more ERC, we can draw down on that debt available to us to fund our purchases.

Having those facilities as we purchase more I E. R. C. So our advance rates that'd be disclosed range anywhere from 35% to 55% and so we can as we acquired more E. R. C. We can draw down on that debt available to us too.

Fund our purchases.

Yeah.

Speaker 8: Okay, very good. And then did you give a number when you gave the $841 million to replace the runoff? Did you give the associated number what you do forecast for runoff over the next 12 months?

Okay.

Good and then did you give the number when you gave the 841 million to replace the run off did you get the associated number what would you do forecast for runoff.

Run off over the next 12 months.

Speaker 4: Yeah, so you're talking about the dollars of ERC running out. That's the 1.5 billion.

Yeah, So you're talking about the dollars up here, so you're running up that's the one 5 billion.

Okay, and then you're saying that the purchases.

Speaker 8: Okay, and then you're saying that the purchases in order to replace that, you need 841 million correct?

In order to replace the you need $841 million correct.

Speaker 6: Correct. And we're just looking at the multiples in a best. Yeah. We are in 23 exactly. Yeah. Okay. Great. Thank you very much.

Correct and we're just looking at the multiples that.

We are seeing in twenty-three exactly.

Yes.

Great. Thank you very much.

Thank you. Thank you.

Yeah.

This concludes our question and answer session I would like to turn the conference back over does that some altra for any closing remarks.

Speaker 1: concludes our question and answer session. I would like to turn the conference back over to Vittrom, all parts for any closing remarks.

Thank you everyone for joining us this afternoon and we appreciate the input and feedback over the next several weeks and months. Thank you.

Speaker 3: Thank you, everyone, for joining us this afternoon and we appreciate further input and feedback over the next several weeks and months. Thank you.

The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.

Speaker 1: The conference is now concluded. Thank you for attending today's presentation, and you may now disconnect.

[music].

Speaker 12: twent 38 is twent 7: two nine two two seven seven four seven seven nine nine seven seven 6, two