Q1 2025 PRA Group Inc Earnings Call
John Rowan, Mark Hughes, David Scharf, Vikram
Speaker Change: Good evening and welcome to PRA Group's first quarter 2025 conference call. All participants will be in a listen on the mode. Should you need assistance, please signal a conference specialist by pressing star key followed
Speaker Change: Please note this event is being recorded.
Jay: I would now like had that I would now like to turn the call over to Mr. Jay must embed Vice President Investor Relations for PRA group.
Speaker Change: Please go ahead.
Speaker Change: Thank you good evening to everyone and thank you for joining US with me today are that gets all president and Chief Executive Officer.
Speaker Change: Sure.
Speaker Change: Didn't of PRA group, Europe, and where cash Segal executive Vice President and Chief Financial Officer.
Speaker Change: We will make forward looking statements during the call, which are based on current beliefs projections and assumptions and expectations.
Speaker Change: Assume no obligation to revise or update these statements.
Speaker Change: 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.
Speaker Change: Please refer to our earnings press release issued today and our SEC filings for a detailed discussion of these factors.
Speaker Change: 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 Dot PRA group Dot com.
Speaker Change: 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.
Speaker Change: All comparisons mentioned today will be between Q1, 2025, and Q1 2024, unless otherwise noted and our Americas results include Australia.
Speaker Change: During our call we will discuss with debt to adjusted EBITDA for the 12 months ended March 31, 2025, as well as the return on average tangible equity.
Speaker Change: Please refer to the appendix of the slide presentation used during this call for a reconciliation of the most directly comparable U S GAAP financial measures to non-GAAP financial measures.
Vic: With that I'd now like to turn the call over to Vic.
Vic: Thank you Rajiv and thank you to everyone for joining us this evening.
Vic: I'm excited to have our incoming president and CEO Martin as children, joining us for today's call.
Vic: Before I introduce Martin let me first recap our overall performance for the quarter and progress against our strategic pillars.
Vic: Building on a successful 2024, we started the year with momentum and deliver another quarter of strong results.
Vic: This was highlighted by a 19% growth in portfolio purchases record ERC.
Vic: Our fourth consecutive quarter of double digit cash collections growth.
Vic: Nearly 300 basis point improvement and cash efficiency.
Vic: While net income was lower compared to prior quarters, given the moderated level of changes in expected recoveries, we still were able to maintain profitability and perhaps more importantly delivered 13% growth in trailing 12 months adjusted EBITDA.
Vic: And this represents the seventh consecutive quarter of adjusted EBITDA growth.
Vic: We continue to make progress across each of our three strategic pillars during the quarter.
Vic: As it relates to the first pillar optimizing investments we deployed capital globally go capitalize on appropriate market opportunities and returns.
Vic: This contributed to attractive pricing across our markets and higher investment levels in Europe, this quarter, leading to a record total ERC.
Vic: Moving on to the second pillar operational execution.
Vic: Within our U S legal collections channel, we remain focused on reducing cycle times and optimizing our post judgment activities.
Vic: These actions along with the increased level of recent portfolio purchases.
Vic: Led to a notable uptick in U S legal cash collections over the past several quarters, increasing 32% year over year in Q1 to a $111 million.
Vic: As a reminder, we do not begin our collection activity within the legal collections channel, but consider using it if and when our customers do not engage with us voluntarily.
Vic: In our U S. Non digital operations, we have can answer our customer reach and engagement.
Vic: Implemented new diagnosed strategies improved also strategies to accommodate customer needs and continued to gain traction in our digital efforts as we experience a significant increase in customer interactions through this channel.
Vic: And lastly, I picked it up managing expenses well.
Vic: This month, we completed the consolidation of three of our U S call centers. Following the successful implementation of work from home protocols for eligible U S connectors, which has contributed to lower than expected attrition in our U S collector base.
Vic: Since our experience suggests that tenured collectors typically perform better than less tenured collectors. This moderation in attrition has led us to grow our offshore head count and a more measured pace this year.
Vic: As we move forward, we will continue to balance the flexibility and cost advantages of our offshore connectors with Daniel and performance.
Vic: U S connectors.
Vic: As we reflect on the past two years I am highly encouraged by all that we have accomplished as a company leveraging our three pillar strategy.
Vic: We enhanced our senior leadership team continue to grow our European business.
Vic: Just record amounts of portfolios globally at attractive pricing.
Vic: Improve our U S call Center strategies.
Vic: Vitalize the U S legal collection channel.
Vic: Launched an expanded offshoring.
Vic: And strengthens our capital structure.
Vic: All of this has translated into delivering accelerated growth and adjusted EBITDA of 13% and the trailing 12 months from a modest 3% in the comparable prior period.
Vic: Overall I believe the work we have been doing he has transformed the business and laid the foundation for Martin and the team to build on the recent progress and drive continued success.
Vic: I'd now like to take a moment to introduce Martin and Howard highlighted how instrument until he has been in building our European business into one of the most efficient densify operations in the region today.
Speaker Change: I am truly excited for him to take the reins and lead the company into its next phase of growth.
Speaker Change: Martin has been with the company for 13 years, following a highly successful strategy and consulting career at Mackenzie.
Speaker Change: He currently serves not only as a president of our European business, but also as a valued member of the senior leadership team.
Speaker Change: And the global investment Committee, which oversees all of the major portfolio investments both in the U S and internationally.
In addition to helping transform our European business. He has been a key partner to me across multiple areas of our U S business.
Including investment oversight and it modernization.
Speaker Change: These efforts coupled with his leadership role across 15 of the 18 markets. We operate in has provided me with a strong global perspective.
Speaker Change: Prior to his current role Martin was a chief operating officer for Europe, but he developed a highly successful operations playbook that is fully aligned with our global three pillar strategy.
Speaker Change: He has already hit the ground running working very closely with me and our co founder and executive Chairman, Steve Pederson to ensure a seamless transition and to sustain momentum in the continued transformation of the U S business.
Speaker Change: I'll now turn it over to Martin to share some of his perspectives and insights from leading the European business and holiday will apply to his new role leading PRA globally.
Martin: Thank you Vic it is a pleasure to connect with everyone today, many of whom I've already met over the years at prior conferences Roadshows and meetings I just wanted to start by thanking Vic for all that he has done for PRA over the past decade first as a board member and more recently as president and CEO. He.
Martin: He's done a tremendous job stabilizing the U S business assembling a seasoned leadership team and returning the company to profitability I believe we're operating in a truly exciting time for PRA underpinned by the numerous competitive strengths and opportunities in our business, including a strong leadership team with decades of industry experience.
Martin: And an opportunity to leverage global talent and scale.
Martin: Deep seller and lender relationships with a robust supply outlook in the U S and a more rational competitive dynamic in Europe compared to a few years ago.
Martin: A diversified global footprint of customers cash cash generation and ERC across 18 markets.
Martin: And finally, an opportunity to continue the operational transformation in the U S.
Speaker Change: Throughout my time, leading our European business, we have developed and shared important lessons and learnings and processes executing across the same themes as a three pillar strategy that has been helping transform the U S business.
Speaker Change: I'm eager to continue the process of leveraging these best practices across our global business.
Speaker Change: As it relates to optimizing investments we have developed a very strong track record in Europe disciplined investments over the years.
Speaker Change: A great example is the 2016 to 2019 time period we.
Speaker Change: We were very judicious in how we invested avoiding aggressive M&A and the purchase of portfolios at subpar returns.
Speaker Change: Our diversification across multiple markets has served us well.
Speaker Change: When the environment was irrational, we pulled back in certain markets, our patience discipline and long term approach has enabled us to take advantage of attractive opportunities as they presented themselves.
Speaker Change: This has resulted in our European business successfully investing more than $3 billion in portfolios in the last seven years with attractive returns, while growing ERC at a compounded annual growth rate of 6%.
Speaker Change: With respect to operational execution, our strategy has been to use technology and standardized processes to create scale across multiple markets. For example, we moved the entire European infrastructure onto a common cloud platform several years ago.
Speaker Change: Also ramped up our digital capabilities and implemented a pan European cloud based contact platform that has created cost efficiencies and the sharing of best practices.
Speaker Change: We continue to test and implement the other technology enhancements and to further improve our operations not to mention we have developed our data and analytics capability by building talent hubs in attracting highly capable individuals which has helped us leverage dynamic scoring strategies that optimize the cash collected in our portfolios and finally as it relates to managing.
Speaker Change: Expenses I've always had an intense focus on cost management, and we've been able to leverage technology and rigorous processes to create one of the most cost efficient platforms in Europe.
Speaker Change: These are just some of the many processes and perspectives that we will be executing to drive our strategy across the company I'm really excited about the opportunities that lie ahead and with that I'll turn it over to Rick Kasch for a summary of our Q1 financial results.
Rick Kasch: Thanks Martin.
Speaker Change: We purchased $292 million of portfolios during the quarter.
Speaker Change: $178 million, where in the Americas and $113 million were in Europe.
Speaker Change: In the U S. We purchased $161 million of portfolios.
Speaker Change: Our 2025 Americas core purchase price multiple finished the quarter at 218 times, which is higher than in the recent past, reflecting the mix of portfolios purchased in the quarter.
Speaker Change: Keep in mind that purchase price multiples are the cash we expect to collect per dollar invested and are influenced in part by the types of portfolios, we buy and the markets in which we buy them.
Speaker Change: In Europe portfolio purchases were $113 million with investments across most of our markets.
Speaker Change: As a result of the strong volume we grew ERC to a record seven $8 billion at the end of the quarter.
Speaker Change: This is up 20% year over year and up 5% on a sequential basis.
Speaker Change: We expect to collect approximately one $8 billion of our current ERC balance during the next 12 months.
Speaker Change: Based on the average purchase price multiples recorded so far in 2025.
Speaker Change: We would need to invest approximately $920 million globally over the next 12 months to replace this run off and maintain current ERC levels.
Speaker Change: Looking to the rest of 2025, we expect portfolio supply to remain at elevated levels in the U S and to be relatively stable in Europe.
Speaker Change: Cash collections for the quarter were $497 million up 11% from the prior year period.
Speaker Change: When the U S core cash collections up 20%.
Speaker Change: The increase in global cash collections was driven by both higher levels of recent portfolio purchases and the positive impact of a cash generating initiatives.
Speaker Change: Similar to previous quarters, roughly half of our total collections in Q1 came from outside the U S.
Speaker Change: Within the U S. Nearly half of the collections came from the legal collections channel, which has a much longer collection timeframe versus other channels.
Speaker Change: Let's turn now to the total portfolio revenue.
Speaker Change: It was $269 million for the quarter.
Speaker Change: With portfolio income of $241 million and changes in expected recoveries of $28 billion.
Speaker Change: Portfolio income was up 19% for the quarter, reflecting an increased level of portfolio investments and improved returns in recent quarters.
Speaker Change: Of the $28 billion in changes in expected recoveries $17 million was due to cash over performance, while the remaining $11 million reflects the net present value of changes in our ERC, which reflects increases in our expectations.
Speaker Change: Future cash collections.
Speaker Change: On a consolidated basis, our overall business over performed by 2% with Europe exceeding expectations by 10%.
Speaker Change: U S core cash collections were up a strong 20% year over year, representing the fifth consecutive quarter of double digit growth.
Speaker Change: Were 4% below our expectations.
Speaker Change: Historically, our first quarter cash collections in the U S have experienced seasonality increases.
Speaker Change: Typically driven by consumer tax refunds that didn't materialize this quarter to the extent that we modeled.
Speaker Change: Our curves are realized each quarter and reflect our best estimate for future cash collections.
Speaker Change: Given the current macroeconomic environment in the U S.
Speaker Change: We have continued to be judicious with respect to ERC increases.
Speaker Change: Notwithstanding the uncertainty in the external environment.
Speaker Change: Our customers remain engaged as reflected in the level of payment plans being established.
Speaker Change: And the associated cash collections in our business.
Speaker Change: To the extent any macro driven consumer stress becomes evident within our business. We believe the continued positive impact from our strategic initiatives.
Speaker Change: Should be able to provide a meaningful offset.
Speaker Change: Total revenues were $270 million for the quarter up 5% year over year.
Speaker Change: Operating expenses were $195 million up 3% from the prior year period.
Speaker Change: Legal collection costs were up $7 million.
Speaker Change: Driven primarily by investments in our U S legal collections channel.
Speaker Change: Which is expected to continue driving growth and future cash collections.
Speaker Change: Our cash efficiency ratio was 61% up from 58% in the prior year period.
Speaker Change: This increase is even after absorbing the additional $7 million of legal collection costs.
Speaker Change: Net interest expense was $61 million, an increase of $9 million.
Speaker Change: Similarly, reflecting higher debt balances due to increased portfolio investments.
Speaker Change: Our effective tax rate was 32% for the quarter.
Speaker Change: For the full year 2025, we expect our effective tax rate to be in the mid twenties, depending on income mix from various countries and other factors.
Speaker Change: Net income attributable to PRA was $4 million or nine cents in diluted earnings per share.
Speaker Change: This was lower than in recent quarters.
Speaker Change: Largely due to the moderated level of changes in expected recoveries mentioned earlier.
Speaker Change: This is a cash driven business and our adjusted EBITDA growth has accelerated over the past 12 months, enabling us to capitalize on strong portfolio of supply while maintaining stable leverage.
Speaker Change: Our debt to adjusted EBITDA ratio was 293 times as of March 31.
Speaker Change: Which is within our long term target of two to three times and well below our debt covenant limits.
Speaker Change: The leverage ratio would be expected to trend to the hiring of our target range during periods of rising portfolio purchases.
Speaker Change: In terms of our funding capacity, we had $3 $1 billion in total committed capital under our credit facilities as of March 31.
Speaker Change: We had a total availability of $919 million comprised of $538 million available based on current ERC and $381 million of additional availability that we can draw from subject to borrowing base and debt covenants.
Speaker Change: Including advance rates.
Speaker Change: We have no debt maturities until November 2027, when our European facility matures.
Speaker Change: We believe the cash generated from our business the capital available under our credit facilities and access to capital markets in both the U S and Europe.
Speaker Change: This should allow us to further capitalize on the strong portfolio of supply environment.
Speaker Change: We believe we have one of the most globally diversified debt purchase businesses in the world.
Speaker Change: We have built our capabilities carefully over the past 25 years.
Speaker Change: Seeking out specific markets partners and platforms.
Speaker Change: Allow us to profitably deploy capital judiciously and Opportunistically.
Speaker Change: As an example, after more than 10 years of building and investing in Brazil.
Speaker Change: Last month, we completed the sale of our equity interest in RCB servicing company for our investments in that market.
Speaker Change: This sale will generate an estimated after tax gain of approximately $28 million.
Speaker Change: Considering the foreign exchange rate in April.
Speaker Change: Importantly, the ownership structure of our Brazilian investment entities remains intact, and we will continue making portfolio investments there through our ongoing relationship with RCB and a longtime local investing partners.
Speaker Change: Overall, the first quarter represented a positive start to the year with encouraging results and key financial metrics, including portfolio investment levels and pricing cash collections.
Speaker Change: Adjusted EBITDA and cash efficiency ratio.
Speaker Change: At this time, we're not changing our previously provided financial targets.
Speaker Change: Except for the return on average tangible equity, which is likely to be at a lower level than our target of approximately 12% as.
Speaker Change: As we move through the coming quarters, we will affirm raise or lower these targets as appropriate.
Speaker Change: In closing we are excited to enter this new chapter in Pra's nearly three decade history and believe we are well positioned to execute on our strategy to drive continued growth profitability and shareholder value.
Speaker Change: Thank you as always for your continued support and with that we are now ready for questions.
Speaker Change: Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by the number one on your Touchtone phone you.
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Speaker Change: First question comes from the line of David Scharf from <unk> capital markets. Your line is now open.
David Scharf: Hi, Yes. Good afternoon, thanks for taking my questions and.
Speaker Change: Welcome aboard Martin.
Speaker Change: Uh huh.
David Scharf: So.
David Scharf: Listen.
David Scharf: First.
David Scharf: First question is really I think what's been done.
David Scharf: Lot of People's minds during this reporting season.
Thus far which is obviously just the state of the consumer and.
David Scharf: I'm wondering.
David Scharf: We have not heard from too many consumer lenders, thus far that.
David Scharf: That they saw a tax refund season being notably.
David Scharf: Maybe lower than prior years, maybe.
David Scharf: Maybe modestly but as you reflect on sort of the seasonal modeling you referred to which I assume refers to tax refund season in the U S.
David Scharf: Do you.
David Scharf: At this point in.
David Scharf: Based on kind of also what you're seeing in April and into May.
David Scharf: Did you feel.
David Scharf: The variance.
David Scharf: Relative to your modeling as.
David Scharf: Is entirely refund driven or are there other.
David Scharf: Behavioral patterns, you're seeing and in consumer.
David Scharf: Payments lately.
David Scharf: Suggest maybe some.
David Scharf: Weakening of the consumer.
David Scharf: Great question, David and very pertinent.
David Scharf: Relative to <unk>.
David Scharf: Our results in the commentary we made this is <expletive> I'll take that.
David Scharf: And Rakesh can can supplement as applicable look from an external perspective in terms of the level of tax refunds that were provided by treasury.
David Scharf: Treasury.
David Scharf: They were.
David Scharf: I think.
David Scharf: Relative to prior years would be regarded as pretty normal right and nothing unusual in the in the volume of pre funds the breakeven.
David Scharf: Internally with regard to our interactions with consumers as we mentioned in our remarks.
David Scharf: We are seeing.
David Scharf: A positive level of engagement with consumers.
David Scharf: Oh.
David Scharf: Maintaining their establishing plans and maintaining their plans.
David Scharf: And so we're not seeing at this point in time and a little bit too.
David Scharf: First few weeks of the second quarter.
David Scharf: Nothing at this point in time that would suggest it.
David Scharf: Falloff in consumer activity with us that said.
David Scharf: Clearly, we had a mismatch between our.
David Scharf: Expectations for cash collection in the quarter and and the actual cash that came in albeit less of a strong quarter with regard to the.
David Scharf: Quarter on quarter increase as well as a year on year increase in cash.
David Scharf: Clearly we had a disconnect with regard to the XP.
David Scharf: Expectations.
David Scharf: In our business and and that just flowed through right. So so we don't see this links.
David Scharf: Is it consumer driven issue in our business.
David Scharf: Our extraordinary at this point in time.
David Scharf: It really was around.
David Scharf: The modeling that we had for the <unk> Saturday, which was I guess in retrospect higher than the actual trends and though and Rakesh I think we've taken a view on.
David Scharf: The causality of this and the implication that maybe you could just add to that right.
David Scharf: Yes.
David Scharf: David Good question look as Vic said from a cash perspective, we had a very strong quarter or you look at the key metrics, whether it's cash collections growth cash EBITDA and cash efficiency that we talked about the 11% growth in cash collections on the call, but even quarter over quarter your cash EBITDA.
David Scharf: <unk> grew 17% and then cash efficiency was up 300 basis points and this is after <unk> 7 million of higher legal spend.
David Scharf: So look it goes back to as Vic said, where we had modeled and so on the U S side.
David Scharf: In our core cash collections were up 20%, which was very strong and this is on top of 22% growth that we had in all of <unk> 24 versus 23, now however, our U S core cash collections had a 4% shortfall relative to the accounting seasonal expectations.
David Scharf: In other words, the 4% cash performance that.
David Scharf: We saw this quarter and it really wasn't an anomaly this quarter after seven straight quarters of positive cash over performance.
David Scharf: You know like you.
David Scharf: U S accounts for about 50% of the cash so at 4% underperformance it equates to roughly about 10 million shortfall versus the seasonal expectations and what really happened is that the.
David Scharf: Q1 cash collections.
David Scharf: Did exceed the Q4 cash collections in terms of the growth rates, we've always seen that uptick.
David Scharf: But it did not exceed to the same magnitude as was reflected in our models.
David Scharf: And so we really believe that this shortfall is timing.
David Scharf: You look at our press release with respect to the purchase price multiples for the Americas vintages, you'll see that they are essentially unchanged.
David Scharf: As we believe we can collect the full amount of the total estimated collections.
David Scharf: Makes sense and I wanted to reiterate our customers both in Europe and in the U S remain engaged and we continue to see payment plans being established.
David Scharf: Yeah.
David Scharf: Got it.
David Scharf: Understood I appreciate all that color.
David Scharf: More of a technical question coming out of that.
David Scharf: Rakesh.
David Scharf: I know it wasn't explicitly quantified, but the reduction in.
David Scharf: The earnings guidance this year from 12% to something below that.
David Scharf: Does that.
David Scharf: Present, just the flow through.
David Scharf: Of the first quarter coming in lower than expected or.
David Scharf: Are you, making an inherent in that.
David Scharf: Assumptions about.
David Scharf: Further in the year.
David Scharf: Not an explicit assumption David I'll take that.
David Scharf: I think look obviously the first quarter came in came in light relative to what we would've modeled right. We've stated that pretty clearly.
David Scharf: As we look out in the rest of the year, just given the macroeconomic environment that we see today.
David Scharf: And the relative degree of uncertainty.
David Scharf: Visa B, what would've been expected three four months ago.
David Scharf: We just felt it was appropriate to signal right that.
David Scharf: The level of.
David Scharf: Of cash generation that might be expected through the next nine months the ability to do.
David Scharf: To influence.
David Scharf: The net present value of future value of initiatives and we've got we just need to be cautious with regard to that rate and so we said that we.
David Scharf: We will.
David Scharf: Reasonably dump.
David Scharf: Comfortable.
David Scharf: Restating abuse with regard to the other vectors that we had pointed out.
David Scharf: Q1's ago.
David Scharf: Certainly.
David Scharf: On the return calculation, we felt that we should signal the appropriate level.
David Scharf: Oh.
David Scharf: Commentary on that play rather than B, b reaffirming at that level and the rest of the oval.
David Scharf: We will demonstrate how all of the other.
David Scharf: The World turns out and then our business operates.
David Scharf: David if I could add to that look to you know.
David Scharf: Buying remains strong as you saw the numbers that I mentioned Europe had a strong quarter. So either buying risks continues to be at elevated levels and we also had a very strong 2024, we bought $1 4 billion globally with 800 million in the U S. So.
David Scharf: So if you think about the revenue the two components portfolio income as well as the change in expected recoveries, we had a 19% growth this quarter and portfolio income and this is on top of a 13% growth. So we expect that line to continue to grow as.
David Scharf: The purchases that were made at significantly higher multiples than say in 2023 as that flows through.
David Scharf: Our P&L and as Vic said, we are taking a more judicious cautious prudent approach with respect to any changes in net present value.
David Scharf: We're seeing increases just given the current macro environment.
David Scharf: Understood great.
Speaker Change: Ill get back in queue, thanks very much.
David Scharf: Thank you.
Speaker Change: Your next question comes from the line of Mark Hughes from <unk>. Your line is now open.
Martin: Yeah. Thank you good afternoon welcome Martin.
Speaker Change: Hum.
Speaker Change: Fishing fee ratio was quite good in the quarter I think your guidance, which I assume is still.
Speaker Change: Yeah.
Speaker Change: Relevant, 60%, plus but you did better than that.
Speaker Change: Was there anything unusual in terms of the expenses this quarter any one timers that helped or is that.
Speaker Change: Just.
Speaker Change: The result of the initiatives you've undertaken.
Speaker Change: Yeah.
Speaker Change: No no.
Speaker Change: No one timers that debt.
Speaker Change: That artificially issued debt ratio in fact, as Rakesh mentioned, though we absorbed.
Speaker Change: A little bit higher legal cost I think it was $7 million.
Speaker Change: So that would be about probably 100 basis points plus right.
Speaker Change: In terms of normalizing that so nothing unusual market I think we signaled at the beginning of the other would be 60% plus and just given.
Speaker Change: The way, we're operating the business the efficiencies we continue to identify.
Speaker Change: The work that's going on globally in the business. So he says.
Speaker Change: Comfortable of.
Speaker Change: Suggesting that you know we were still comfortable with that 60% plus ratio.
Speaker Change: Yes, Mark if you blow it down some of the light turns you'll actually see some improvement in some of those cost line items as Z and we've spent a lot of time talking about initiatives on the cash side, but we've also been very clear that our focus has been on.
Speaker Change: On having a marginal cost of running the business that's lower than the growth.
Speaker Change: Cash and so you'll see that even though our total expenses are up that's really to drive.
Speaker Change: The growth in the business, but some of those line items have actually started to reduce now as the initiatives get implemented.
Speaker Change: Yeah, Yeah, I was just looking at the compensation costs.
Speaker Change: In the U S. The purchases were down a little bit year over year, the multiples were up.
Speaker Change: Why didn't you buy a little bit more in the U S under the.
Speaker Change: Stances.
Speaker Change: It's it really is a good signal.
Speaker Change: Mark about how we run a global.
Speaker Change: Investment franchise right and.
Martin: Martin speak to that.
Martin: Some of the activity that you've seen in Europe over the last.
Speaker Change: A few months.
Speaker Change: What we're seeing from a supply dynamic there right yeah, no. We had a we had a good quarter for buying in Europe.
Speaker Change: Overall, the market is fairly stable I would say in Europe, but we've seen I think the competitive intensity has has normalized to a to a level that we're more comfortable with compared to where it was a couple of years ago. So overall I think we're off to a good start for this year and I think look I think we take a view on on ensuring that.
Speaker Change: We are optimizing our level of investment globally, depending on where they see the supply emanate from end of <unk>.
Speaker Change: The way it turned out this quarter right. So.
Speaker Change: We really do run a global investment view.
Speaker Change: On the stigma pencil quarter to quarter, we will likely see movements across that.
Speaker Change: No nothing unusual.
Speaker Change: Does U S supply still increasing or has it stabilized.
Speaker Change: I think we've just had an exit in fact, they had conversations in the last week right.
Speaker Change: Head of investments Olin was meeting with a number of our railroad.
Speaker Change: Senior seller.
Speaker Change: Hum counterparts and.
Speaker Change: The signals coming back to us is that they're not increasing but they're going to remain at an elevated rate.
Speaker Change: For a period of time, that's what we are getting from them right. So we'll see how that how that shakes out but.
Speaker Change: It remains elevated and then.
You're close to the overall market as we are right but.
Speaker Change: Let's just keep growing and charge off rates remain high right. So I think supply should remain.
Speaker Change: Persistent and elevated.
Speaker Change: For the near term for sure for sure.
Speaker Change: Okay.
Speaker Change: Thank you very much.
Speaker Change: As a reminder, if you have a question. Please press star one on your telephone keypad.
Speaker Change: Your next question comes from the line of Robert Dodd from Raymond James Your line is now open.
Speaker Change: Hi, everyone. This is haley on for Robert Thanks for the question.
Speaker Change: I know you mentioned earlier that consumers are continuing to remain engaged and cash collection for flow through this quarter was primarily driven by seasonality are you seeing any other emerging trends or not.
Speaker Change: Microchip changes outside of seasonality in consumer behavior that could have contributed.
Speaker Change: No not at all no I think we obviously you as a consumer driven business.
Speaker Change: And then in Europe.
Speaker Change: We have.
Speaker Change: We try to have a reasonable bead on the level of interaction with consumers on a on a daily basis right.
Speaker Change: Plans are being established.
Speaker Change: To which they are being maintained and sort of you know come through.
Speaker Change: The average payment size is being established in those plans.
Speaker Change: Martin maybe you could speak to what Youre seeing in Europe right. Yeah, we haven't seen any major shift in the European consumer behavior at least among our customers.
Speaker Change: In 2025, Q1 is off to a decent start there to cash came in a bit higher than we originally expected. So at the moment at least it saw its consistent with what we expected.
Speaker Change: Understood. Thanks, and just a quick follow up here with the recent approval of the capital one and discover merger considering discover has not historically never been a seller can you speak to or quantify some of the long term impact do you expect to see on the business from that.
Speaker Change: We don't we don't.
Speaker Change: Gaslog cover and disclose.
Speaker Change: We will be by forming the impact all the C.
Speaker Change: We are close to the market with regard to the M&A activity and up and to the extent that you do.
Speaker Change: That M&A activity.
Speaker Change: It's more supply into the system that will be sort of a general positive put us right.
Speaker Change: So it will be a question already to be honest one.
Speaker Change: Of the.
Speaker Change: Cap, one and discover right with regard to their perspectives.
Speaker Change: On this whole market picks.
Speaker Change: Got it thanks for the color.
Speaker Change: Your next question comes from the line of Mark Hughes from <unk>. Your line is now open.
Speaker Change: Yeah. Thank you.
Speaker Change: Legal collections costs are they going to continue to be elevated or does that normalize at some point here.
Mark: Yeah, Mark I think like.
Mark: Like we said back in February we do expect the legal collection costs to increase but at a much lower levels than what we saw in 24. So 24, just to remind you that.
Mark: You have the number get to 125 buses.
Mark: Buses are $89 million in 'twenty, three and so that was a 40% increase we expect that number to be much lower than that in face look we've been investing.
Mark: Heavily illegal that's not how we like to start it depends on the ability of the customers to pay.
Mark: And that's when we make decisions whether or not to put our folks into the legal channel. So we think that we are investing in this business with future cash growth.
Mark: But you should see those levels in legal spend start to moderate in 2025.
Mark: And to some extent versus the.
Mark: The legal spend if youre going to see this year would be a disaster.
Mark: Not not us it won't be we havent made strategy changes with regard to.
Mark: Putting more people into legal is really the amount of pre bought last deal. If there's a time lag between when we buy it and when it may be appropriate.
Mark: Qualifying for legal right and that will be coming through this year. So that's also when are you going to be driving the increase year on year, but it's going to be at a much more moderated pace mark relative to what you saw as an increase in 'twenty pool was 23.
Mark: Okay.
Speaker Change: Understood and then the non controlling interest how should we model that or at least how should we think about the drivers there.
Mark: Yes, so mark.
Mark: This is the investment we have in Brazil.
Mark: So as I've mentioned in the past we've had a partnership there for 10 years. It has done really well for us.
Mark: On the investment side and on the servicing side, we had an opportunity to exit the stake in the servicer that we partnered with and that obviously resulted in a game that will be recognized in Q2.
Mark: I mentioned on the call was $28 million based on the FX in April on an after tax basis and the other.
Mark: NCI is really the income from the investments that we're making there.
Mark: And you should just assume that let's say, it's a 50 50 partnership and so given the profitability there in the business coming out of those investments.
Mark: 50% of the share counts to us 50% of the share count goes to the partner and that's the NCI line item.
Mark: Thank you.
Speaker Change: Once again I say reminder, if you have a question. Please press star one on your telephone keypad.
Speaker Change: There are no further questions at this time I will now turn the call over to Mr. Vic Adult please continue.
Speaker Change: Thank you everybody for joining us today.
Speaker Change: Thank you for your support and we look forward to meeting with you in a few months' time talking about our second quarter results appreciate it.
Speaker Change: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
Speaker Change: Oh.
Speaker Change: Yeah.
Speaker Change: [music].