Q2 2025 PRA Group Inc Earnings Call

Operator: Good evening and welcome to PRA Group's second quarter 2025 conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then the number one on your touchstone phone. To withdraw your question, please press star, then the number two. Please note this event is being recorded. I would now like to turn the conference call over to Mr. Najim Mostamand, Vice President, Investor Relations for PRA Group. Please go ahead.

Good evening and welcome to PRA Group's second quarter 2025 conference call.

All participants will be in a lesson-only mode.

Should you need assistance, please signal a conference specialist by pressing star, key followed by zero.

After today's presentation, there will be an opportunity to ask questions.

To ask a question, you may press star then the number 1 on your touchtone phone.

To withdraw your question. Please press star. Then the number 2.

Please note this event is being recorded.

I would now like to turn the conference call over to Mr. Najima. And vice president investor relations for pra group. Please go ahead.

Najim Mostamand: Thank you, Operator. Good evening, everyone, and thank you for joining us. With me today are Martin Sjolund, President and Chief Executive Officer, and Rakesh Sehgal, Executive Vice President and Chief Financial Officer. We will make forward-looking statements during the call, which are based on management's current beliefs, projections, assumptions, and expectations. We assume no obligation to revise or update these statements. We caution listeners that these forward-looking statements are subject to risks, uncertainties, assumptions, and other factors that could cause our actual results to differ materially from our expectations. Please refer to our earnings press release issued today and our SEC filings for a detailed discussion of these factors. The earnings release, the slide presentation that we will use during today's call, and our SEC filings can all be found in the Investor Relations section of our website at www.pragroup.com.

Thank you, operator. Good evening, everyone. And thank you for joining us with me today, are Martin scholand president and chief executive officer and resew Executive, Vice President and Chief Financial Officer.

We will make 4 looking statements during the call, which are based on Management's current beliefs projections, assumptions and expectations.

We assume no obligation to revise or update these statements.

That could cause our actual results to differ materially from our expectations.

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

Najim Mostamand: 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. All comparisons mentioned today will be between Q2 2025 and Q2 2024, unless otherwise noted, and our America's results include Australia. During our call, we will discuss net debt to adjusted EBITDA for the 12 months ended June 30th, 2025. Please refer to the appendix of the slide presentation used during this call for a reconciliation of the most directly comparable US GAAP financial measures to non-GAAP financial measures. And with that, I'd now like to turn the call over to Martin.

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.prg.com.

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

All comparisons mentioned today will be between Q2 20225 and Q2 2024 unless otherwise noted and our America's results include Australia,

During our call, we will discuss net debt to adjusted EVA for the 12 months ended June 30, 2025.

Please refer to the appendix of the slide presentation used. During this call for a Reconciliation of the most directly comparable US, gaap Financial measures to non-gaap financial measures.

And with that, I'd now like to turn the call over to Martin.

Martin Sjolund: Thank you, Najim, and thank you, everyone, for joining us this evening. It's only been seven weeks since the middle of June that I took on the role of President and CEO, but we've gotten off to a good start, and the entire team is working with urgency to continue improving our performance. During this time, I've been in ongoing active dialogue with leaders across the organization, credit issuers who sell non-performing loans, our rating agencies, and of course, our investors. In fact, I've had dozens of engaging and insightful investor meetings in this short span, and I look forward to many more in the months ahead. Having been with the company for 13 years now, including the last seven as part of a global senior leadership team, I have a clear perspective on how we can best deliver value for our shareholders.

Thank you. And thank you everyone for joining us this evening.

It's only been 7 weeks since the middle of June that I took on the role of president and CEO. But we've gotten off to a good start and the entire team is working with urgency to continue improving our performance.

During this time, I've been an ongoing active dialogue with leaders across the organization. Credit issuers, who sell non-performing loans, a rating agencies and of course our investors

In fact I've had dozens of engaging and insightful investor meetings in this short span and I look forward to many more in the months ahead.

Martin Sjolund: This perspective has been significantly shaped by the transformation I helped implement in our European business. As a reminder, over the past decade, I served as Europe's Chief Operating Officer prior to stepping into the role of President of Europe. When I became President in 2018, we faced a challenging and highly competitive market in Europe. At the same time, internally, we had a patchwork of systems and limited digital IT and analytical capabilities. Under my leadership, the team laid out a clear strategy to transform the European business that included upgrading our technology platform, bolstering our digital capabilities, investing in talent, and standardizing key processes and technologies across markets. As a result, we established a proven multi-year track record of performance in Europe, driven by a long-term orientation and four main themes. Number one, the leadership team.

Having been with the company for 13 years now, including the last 7 as part of the global senior leadership team. I have a clear perspective on how we can best deliver value for our shareholders.

This perspective has been significantly shaped by the transformation I helped Implement in our European business.

As a reminder over the past decade, I served as Europe's Chief Operating Officer prior to stepping into the role of president of Europe.

When I became president in 2018, we faced a challenging and highly competitive market in Europe.

At the same time internally, we had a patchwork of systems and limited digital it and analytical capabilities.

Under my leadership, the team laid out a clear strategy to transform the European business. That included upgrading our technology platform, bolstering our digital capabilities, investing in talent, and standardizing key processes and technologies across markets.

Martin Sjolund: We have an experienced and tenured leadership team supported by a strong performance management culture. Number two, underwriting. We have a disciplined underwriting approach, leading to ERC from the European business growing to half of PRA's total ERC in recent years. Number three, operational execution. We also have a long track record of cash overperformance and cash collections growth, supported by a modern technology platform and strong digital capabilities. And number four, cost efficiency. Over the past seven years, we have developed one of the most cost-efficient platforms in the region. This success gives me confidence in our ability to drive change and deliver value, and I will bring many of these learnings to the global business, including our US business, which is well underway in its transformation journey.

As a result, we established a proven multi-year, track record of performance in Europe, driven by a long-term orientation and 4 main themes. Number 1, the leadership team, we have an experienced and tenured leadership team supported by a strong Performance Management culture. Number 2 underwriting, we have a disciplined underwriting approach leading to ERC from the European business growing to half of PR's total ERC in recent years.

Number 3, operational execution. We also have a long track record of cash over performance and cash collections, growth supported by a modern technology platform and strong digital capabilities.

And number 4, cost efficiency over the past 7 years, we have developed 1 of the most cost-efficient Platforms in the region.

Martin Sjolund: What's perhaps most encouraging is that PRA operates from an incredibly strong foundation built through decades of experience, scale, and deep operational and compliance expertise. Starting from the top, we have a highly seasoned leadership team with decades of experience, not only in the debt buying industry, but also in strategy, financial services, and operations. I'm confident that we have a strong team in place to drive improved performance. In addition, we have presence across 18 countries, giving us a healthy level of global diversification. This reinforces the resilience of our business model and enables us to take advantage of unique opportunities, as seen by our operations in Brazil. We entered Brazil through a joint venture in 2015 that encompassed investments in a servicing platform and making portfolio investments.

This success gives me confidence in our ability to drive change and deliver value. And I will bring many of these learnings to the global business, including our us business, which is well underway in its transformation Journey,

What's perhaps most encouraging is that P operates from an incredibly strong Foundation. Built through Decades of experience, scale and deep operational and compliance expertise.

Starting from the top, we have a highly seasoned leadership team with decades of experience, not only in the debt buying industry but also in strategy, financial services, and operations. I'm confident that we have a strong team in place to drive improved performance.

In addition, we have presence of 8 countries, giving us a healthy level of global diversification.

This reinforces the resilience of our business model and enables us to take advantage of unique opportunities as seen by our operations in Brazil.

Martin Sjolund: Over the past 10 years, we have developed a strong local franchise together with our local partners, collecting more than $1 billion, and we still have more than $200 million in ERC. This past quarter, we completed the previously announced sale of our equity interest in RCB, the servicing platform for our investments in Brazil, generating a $30 million after-tax gain while still maintaining our portfolios and operations in that market. I would especially like to thank our Brazilian partners, and I look forward to continued opportunities there in the future. This case illustrates how PRA can bring our capital and experience into new markets and create value in a variety of ways. We also have deep seller relationships globally, with an attractive supply environment in the US and a more rational competitive dynamic in Europe compared to a few years ago.

We entered Brazil through a joint venture in 2015, that encompassed investments in a servicing platform and making portfolio Investments over the past 10 years, we have developed a strong local franchise together with our local Partners collecting more than 1 billion dollars and we still have more than 200 million dollars in the ERC.

10 after tax gain, while still maintaining our portfolios and operations in that market. I would especially like to thank our Brazilian partners and I look forward to continued opportunities. There in the future. This case illustrates how P can bring our capital and experience into new markets and create value in a variety of ways.

Martin Sjolund: Markets are always competitive, but at the moment, we see fewer new entrants overpaying for portfolios than we have in the past. We remain focused on higher return opportunities and maintaining a disciplined approach to purchasing. Our European business continues to deliver strong results, and I'm excited about the path forward under the new leadership of Owen James, who recently succeeded me as President of PRA Group Europe. Owen has also been in the company for 13 years now and most recently served as our Global Investments Officer, where he was instrumental in strengthening our seller relationships, improving our purchase price multiples, and achieving record portfolio purchases of $1.4 billion in 2024. His promotion is another great example of how we are leveraging the strengths of our global business and team to drive results.

We also have deep cellar relationships globally, with an attractive supply environment in the U.S. and a more rational competitive dynamic in Europe compared to a few years ago.

Markets are always competitive, but at the moment, we see fewer new entrance overpaying for portfolios than we have in the past.

We remain focused on higher return opportunities, and maintaining a disciplined approach to purchasing.

Our European business continues to deliver strong results, and I'm excited about the path forward. Under the new leadership of Owen James, who recently succeeded me as president of PRA Group Europe.

Owen has also been in the company for 13 years now and most recently, served as our Global Investments officer, where he was instrumental in our Cellar relationships, improving our purchase price multiples and achieving record portfolio purchases of 1.4 billion dollars in 2024.

His promotion is another great example of how we are leveraging. The strengths of our Global business and team to drive results.

Martin Sjolund: While I see opportunities to further strengthen our European business, I believe the biggest opportunity for us today is accelerating the transformation of our US business. We've made great strides over the past couple of years, particularly in our legal, digital, and call center operations, but I still see areas to improve and strengthen. Additionally, I want to mention our capital structure. I have met with many of our major global creditors and bondholders over the past few weeks, and I'm encouraged by the strong creditor relationships and ample funding we have in place, with no debt obligations maturing until 2027. This funding position enables us to continue capitalizing on the portfolio supply environment while investing further to improve our operating platform. As you can see, there is a lot to be excited about, and I see significant potential in developing PRA into the global leading player in our industry.

While I see opportunities to further strengthen our European business, I believe the biggest opportunity for us today is accelerating the transformation of our us business.

We've made great strides over the past couple of years, particularly in our legal, digital and call center operations, but I still see areas to improve and strengthen

Additionally, I want to mention our capital structure. I have met with many of our major global creditors and bondholders over the past few weeks, and I'm encouraged by the strong creditor relationships and ample funding we have in place, with no debt obligations maturing until 2027.

This funding position enables us to continue capitalizing on the portfolio Supply environment, while investing further to improve our operating platform.

Martin Sjolund: The work to achieve this is well underway, as we focus on making the changes necessary to drive a meaningful improvement in our financial and operational results. I'll now spend some time going through my priorities for the second half of this year. As I mentioned on the last call, I remain focused on our three core strategic pillars of optimizing investments, operational execution, and managing expenses. Starting with optimizing investments, we are committed to remaining disciplined and strategic in our allocation of capital. This means executing on our global investment framework and staying focused on higher return opportunities. We can deploy capital where we see the best returns for PRA, and we have shown in the past that we are willing to hold back when we feel pricing is overheated.

As you can see, there is a lot to be excited about, and I see significant potential in developing P into the global leading player in our industry.

The work to achieve this is well underway as we focus on making the changes necessary to drive a meaningful improvement in our financial and operational results.

I'll now spend some time going through my priorities for the second half of this year.

As I mentioned on the last call, I remain focused on our 3, core strategic pillars of optimizing Investments, operational execution, and managing expenses.

Starting with optimizing Investments, we are committed to remaining disciplined and strategic, in our allocation of capital. This means executing on our Global investment framework and staying focused on higher return opportunities.

Martin Sjolund: That said, while there are local variances from time to time, the overall market volumes and competitive intensity are tracking as we expected. Turning to operational execution, we are focused on continuing to improve the overall productivity and efficiency of the US business. Regarding our call centers, I regularly spend time with our frontline agents, and I'm always reminded by what a challenging and important role they have, and I want to acknowledge and thank them for their hard work and contribution to our overall success. We recently revamped our performance management system, which should lead to a better reward structure for our highest performers. We also successfully consolidated our site footprint from six to three call centers in the US. Combined with our work-from-home initiative for eligible agents, this has translated into a higher retention of our most tenured and productive staff.

We can deploy Capital where we see the best returns for p and we have shown in the past there that we are willing to hold back. When we feel pricing is overheated.

That said, while there are local variances from time to time, the overall market volumes and competitive intensity are tracking as we expected.

Turning to operational execution, we are focused on continuing to improve the overall productivity and efficiency of the US business.

Regarding our call centers. I regularly spend time with our Frontline agents and I'm always reminded by what a challenging and important role they have. And I want to acknowledge and thank them for their hard work and contribution to our overall success. We recently revamped our performance management system, which should lead to a better reward structure for our highest performers. We also successfully Consolidated our site footprint from 6 to 3 call centers in the US

Combined with our work from home Initiative for eligible agents. This is translated into a higher retention of our most tenured and productive staff.

Martin Sjolund: Within the legal collections channel, we've made great strides in reducing the overall time to collect cash. We also continue to see growth in the number of wage garnishment filings, which has been recently supplemented by other activities in post-judgment execution. These actions have resulted in a significantly revamped legal channel that is becoming more efficient and productive in driving cash collections. Despite all of this progress in the call center and legal channel, we must go beyond what we are already doing, and this includes taking a different approach on how we are organized and track performance and how we use technology, data, and analytics. To support this, we are reorganizing the structure of our US operations to create the US-focused operational team led by our Global Operations Officer, Steve Mackey.

Within the legal collections channel, we've made great strides in reducing the overall time to collect cash.

We also continue to see growth in the number of wage garnishment filings which has been recently, supplemented by other activities in post-judgment execution, these actions have resulted in a significantly revamped legal channel. That is becoming more efficient and productive in driving cash collections.

Despite all of this progress in the call center and legal Channel, we must go beyond what we are already doing. And this includes taking a different approach on how we are organized and track performance, and how we use technology data and Analytics.

Martin Sjolund: Steve brings more than three decades of industry experience, having spent his career leading all aspects of collections operations for Citigroup. He played a key role in driving operational execution and improving efficiency across our US business, and his new team will now be measured on a single P&L. I believe this will result in more accountability and faster decision-making. As a way to elevate our standards, we have also announced a return-to-office initiative for our corporate and support staff, which we expect to lead to better teamwork, performance, and collaboration across functions. But we also need to ensure that we can attract the best talent when it comes to analytics, technology, and beyond. Therefore, we will be setting up an office in Charlotte later this year.

To support this. We are reorganizing the structure of our us operations to create a US focused operational. Team led by our Global operations officer Steve Mackey.

Steve brings more than 30 years of industry experience, having spent his career leading all aspects of collections operations for Citigroup.

Will result in more accountability and faster decision-making.

As a way to elevate our standards, we have also announced a return to office Initiative for our corporate and support staff, which we expect to lead to better, teamwork, performance, and collaboration across functions.

But we also need to ensure that we can attract the best talent when it comes to analytics technology and Beyond.

Martin Sjolund: To be clear, we are not moving our headquarters, but we acknowledge the need to access specialist talent, and having access to a significantly larger market will help us achieve this goal. It's the same playbook we have been using in Europe to access and retain top talent. As it relates to our technology, we are performing a deep-dive analysis on how we can best accelerate the modernization of our US IT platform. In Europe, we have already deployed a state-of-the-art cloud-based contact platform across all the markets, and our infrastructure there is on one common cloud. We have also consolidated our collection systems to simplify the data sources and leverage expertise across markets. These moves have resulted in significant efficiencies in Europe, and I'm looking at opportunities for how we can apply those learnings and improve our technology platform in the US.

Therefore we we will be setting up an office in Charlotte later. This year to be clear, we are not moving our headquarters but we acknowledge the need to access specialist talent and having and having access to a significantly larger market will help us achieve this goal. It's the same Playbook. We have been using in Europe to access and retain top talent

as it relates to our technology, we are performing a deep dive analysis on how we can best accelerate the modernization of our us. It platform in Europe, we have already deployed. A state-of-the-art cloud-based contact platform across all the markets and our infrastructure there is on 1 common Cloud. We have also Consolidated our collection systems to simplify the data sources and leverage expertise across markets these moves have resulted in a significant deficiencies in Europe and I'm looking at opportunities for how we can apply those learnings and improve our technology platform in the US.

Martin Sjolund: Finally, turning to managing expenses, I'm focused on other ways to further improve our efficiency. While there is an opportunity to continue leveraging our offshore capabilities, we must also supplement that with a comprehensive review of our overhead costs. It is important that we manage the business with maximum efficiency. In Europe, there are numerous markets where we have had to consolidate or restructure in order to improve efficiencies or withstand downturns in the market cycle. So there's already a strong blueprint within the company for making these adjustments, and I have already started working closely with our leaders in the US to identify cost-saving opportunities. These actions will take time, and I don't expect to see a significant impact in the near term, but we will structure our business to support the most productive cash-generating activities.

Finally turn it to managing expenses, I'm focused on other ways to further improve our efficiency while there is an opportunity to continue leveraging. Our offshore capabilities. We must also supplement that with a comprehensive review of our overhead costs.

It is important that we are managed the business with maximum efficiency.

In Europe, there are numerous markets where we have had to consolidate or restructure in order to improve efficiencies or withstand downturns in the market cycle. So there's already a strong blueprint within the company for making these adjustments. I have already started working closely with our leaders in the U.S. to identify cost savings opportunities.

Martin Sjolund: So to summarize, the five main priorities we've focused on for the second half of the year are: number one, building on the momentum of our cash-generating initiatives; number two, restructuring our US operations; number three, implementing return-to-office for our corporate and support staff; number four, performing a deep-dive analysis on modernizing our US technology platform; and number five, kicking off a comprehensive review of our overhead costs. We are tackling all these priorities with urgency and will introduce additional initiatives as the year progresses and we enter 2026. Overall, I'm excited by the opportunity to truly transform our business and to make impactful changes that better position PRA to deliver substantial and sustainable value. And with that, I'll turn it over to Rakesh for a summary of our Q2 financial results before returning to provide some closing remarks.

These actions will take time and I don't expect to see a significant impact in the near term, but we will structure our business to support the most productive cash-generating activities.

So, to summarize the 5 main priorities, we've focused on for the second half of the year are number 1 building on the momentum of our cash generating initiatives. Number 2, we structuring our us operations number 3, improve to office for a corporate and support staff.

Number 4: performing a deep dive analysis on modernizing our U.S. technology platform. And Number 5: taking off a comprehensive review of our overhead costs.

We are tackling all these priorities with urgency and will introduce additional initiatives as the year progresses and we enter 2026.

Overall, I'm excited by the opportunity.

To truly transform our business and to make impactful changes that better position P to deliver substantial and sustainable value.

And with that, I'll turn it over to rash for a summary of our Q2 Financial results before returning to provide some closing remarks.

Rakesh Sehgal: Thanks, Martin. We purchased $347 million of portfolios during the quarter, of which $199 million were in the Americas, and $147 million were in Europe. On a year-to-date basis, our 2025 purchase price multiple was 2.14 times for Americas core and 1.82 times for Europe core. Both represent a continuation of the upward trend in purchase price multiples we have experienced in the past couple of years. As comparison, the Americas core purchase price multiple was 1.75 times at the start of 2023. This trend reflects both the strong portfolio supply, especially in the US, as well as our disciplined approach to investing in portfolios with higher returns globally. We will maintain this discipline and the high-return focus to drive cash collections, portfolio income, and ultimately net income.

Thanks Martin.

We purchased 347 million of portfolios during the quarter of which 199 million were in the Americas and 147 million were in Europe.

State basis are 2025 purchase price. The multiple was 2.14 times for America's core and 1.82 times for Europe's core.

Both represent a continuation of the upward Trend in purchase price multiples. We have experienced in the past couple of years.

As comparison, the America score purchase price multiple was 1.75 times at the start of 2023.

This trend reflects both the strong portfolio supply, especially in the US, as well as our disciplined approach to investing in portfolios with higher returns globally.

We will maintain this discipline and the high return Focus to drive cash collections portfolio income and ultimately net income.

Rakesh Sehgal: Primarily as a result of strong buying this quarter, we grew ERC to another record of $8.3 billion at the end of Q2. This is up 22% year over year and up 6% on a sequential basis. Looking to the second half of 2025, we expect portfolio supply to remain at elevated levels in the US and to be relatively stable in Europe. Cash collections for the quarter were $536 million, up 13% from the prior year period. This is on top of the double-digit growth we experienced last year. The increase for this quarter was driven by both higher levels of recent portfolio purchases and the continued investments we have been making in the US legal channel. Q2 US legal cash collections grew 24% year over year to $119 million.

Primarily as a result of strong buying this quarter, we grew ERC to another record of 8.3 billion at the end of Q2.

This is up 22% year-over-year and up 6% on a sequential basis.

Looking to the second half of 2025.

We expect portfolio Supply to remain at elevated levels in the US and to be relatively stable in Europe.

Cash collections for the quarter were 536 million up, 13% from the prior year period.

The increase for this quarter was driven by both higher levels of recent portfolio purchases and the continued investments we have been making in the U.S. legal channel.

Rakesh Sehgal: As a reminder, legal is an important channel for us, but it is not the channel that we lead with. We will consider using it if and when customers do not choose to engage with us voluntarily. While there is an upfront investment required in the form of court costs, the legal channel typically provides greater collections certainty and a higher overall amount of cash collected versus other channels. We look at all our collection strategies from a net present value perspective, and because of its strong relative performance and value, we will be looking to further strengthen our legal collections channel. Let's turn now to total portfolio revenue, which was $284 million for the quarter, up 1%. Portfolio income, which is the yield component of our portfolio revenue and the more predictable revenue line item, was $251 million, up 20% for the quarter.

Q2 US legal cash collections grew 24% year-over-year to 119 million.

As a reminder, legal is an important channel for us, but it is not the channel That We lead with.

We will consider using it. If and when customers do not choose to engage with us, voluntarily

While there is an upfront investment required, in the form of court costs.

The legal channel typically provides greater collections certainty and a higher overall amount of cash collected versus other channels.

We look at all our collection strategies from a net present value perspective.

And because of its strong relative performance and value, we will be looking to further strengthen our legal collections Channel.

Let's turn now to total portfolio revenue, which was $284 million for the quarter, up 1%.

Portfolio income, which is the yield component of our portfolio revenue and the more predictable Revenue line item was 251 million up. 20% for the quarter.

Rakesh Sehgal: This year-over-year growth has accelerated from the growth we saw in Q2 last year, reflecting an increased level of portfolio investments at higher purchase price multiples. The other portfolio line item is changes in expected recoveries, which was $33 million this quarter and included cash overperformance of $40 million. On a consolidated basis, our overall business overperformed by 7%, with Europe exceeding expectations by 14% and the Americas exceeding by 3%. This $40 million in overperformance was partially offset by negative $7 million in changes in expected future recoveries, which primarily reflects ERC adjustments we have made in the US. Overall, the US vintages exceeded expectations by 3%, with the recent US core vintages performing in line with expectations this quarter. However, based on our latest estimates, we have adjusted our forecast for cash collections over the life of the vintages, primarily on the 2023 vintage.

This year-over-year growth has accelerated from the growth. We saw in Q2 last year, reflecting an increased level of portfolio Investments at higher purchase price multiples.

the other portfolio line item is changes in expected, recoveries

Which was 33 million this quarter and included cash over performance of 40 million.

On a Consolidated basis. Our overall business overperformed by 7% with Europe, exceeding Expectations by 14% And the Americas exceeding by 3%.

This 40 million dollars in over performance was partially offset by negative. -7 million in changes in expected future, recoveries, which primarily reflects ERC adjustments. We have made in the US

Overall, the US vintages exceeded expectations by 3% with the recent us core vintages performing in line with expectations this quarter.

However, based on our latest estimates, we have adjusted our forecast for cash collections over the life of the vintages primarily on the 2023 vintage.

Rakesh Sehgal: As a reminder, GAAP accounting requires us to make our best and most accurate estimate each quarter for each vintage, which often introduces volatility in changes in expected recoveries, even if cash collections meet or beat expectations for that vintage in the current quarter. It's important to note that our cash curves span many years, as evidenced by the fact that we are still collecting on vintages that are 10 years old or more. Operating expenses were $203 million, up 4% from the prior year period. This was primarily driven by increases in professional and outside services expenses and legal collection costs. Professional and outside services expenses were up $3 million, primarily due to increased investment in call center offshoring to provide greater operating flexibility as that channel ramps up.

As a reminder, gaap accounting requires us to make our best and most accurate estimate. Each quarter for each vintage which often introduces volatility in changes in expected. Recoveries even if cash collections meet or beat expectations for that vintage in the current quarter.

It's important to note that our cash curves span many years as evidenced by the fact that we are still collecting on vintages that are 10 years old or more.

Operating expenses were $203 million, up 4% from the prior year period.

This was primarily driven by increases in professional and outside services expenses and legal collection costs.

Rakesh Sehgal: Our US-focused offshore agent headcount grew 34% year over year and now makes up more than 35% of our overall US-focused agent headcount. Legal collection costs were up $2 million, driven primarily by investments in our US legal channel, which is expected to continue driving growth in future cash collections. While the growth in legal collection costs was somewhat muted this quarter, we expect the growth to be higher next quarter. Our cash efficiency ratio was 62%, up from 59% in the prior year period. Net interest expense was $62 million, an increase of $7 million, primarily reflecting higher debt balances due to increased portfolio investments. Our effective tax rate was 25% for the quarter. For full year 2025, we expect our effective tax rate to be in the mid to high 20s, depending on the income mix from various countries and other factors.

Professional and outside services expenses were up $3 billion, primarily due to increased investment in call center offshoring to provide greater operating flexibility as that channel ramps up.

Our U.S.-focused offshore agent headcount grew 34% year-over-year and now makes up more than 35% of our overall U.S.-focused agent headcount.

Legal collection costs were up 2 million dollars.

Driven primarily by investments in our U.S. legal channel, which is expected to continue driving growth in future cash collections.

While the growth in legal collection costs was somewhat muted. This quarter, we expect the growth to be higher next quarter.

Our cache efficiency ratio was 62% up from 59% in the prior year period.

Player dead balances due to increased portfolio Investments.

Our effective tax rate was 25% for the quarter.

Rakesh Sehgal: Net income attributable to PRA was $42 million, or $1.08 in diluted earnings per share. This includes the approximately $30 million after-tax gain from the previously announced sale of our equity interest in RCB, our servicing provider in Brazil. Excluding this one-time gain, our net income attributable to PRA was $13 million, or $0.32 in diluted earnings per share. This transaction demonstrates our ability to be opportunistic and continue to deliver economic value for our shareholders. Given that we are a cash-on-cash business, we believe it is also important to look at adjusted EBITDA in addition to net income, which is susceptible to quarterly fluctuations because of how this industry's revenue accounting works. Adjusted EBITDA represents what we believe to be a better view of our operational and financial progress and performance.

For the full year 2025, we expect our effective tax rate to be in the mid to high 20s, depending on the income mix from various countries and other factors.

Net income attributable, to P was 42 million or 1.8 cents in diluted earnings per share.

This includes the approximately 30 million after tax gain from the previously announced sale of our Equity interest in RCB.

Our servicing provider in Brazil.

Excluding this 1 time gain our net income attributable, to P was 13 million or 32 cents in diluted earnings per share.

This transaction, demonstrates. Our ability to be opportunistic and continue to deliver economic value for our shareholders.

Given that we are a cash-on-cash business, we believe it is also important to look at adjusted EBITDA in addition to net income, which is susceptible to quarterly fluctuations because of how this industry's revenue accounting works.

Rakesh Sehgal: As a result of our strong cash collections growth and disciplined expense management in recent quarters, we have been able to accelerate adjusted EBITDA growth, which grew 20% this quarter versus the 13% growth in cash collections. Our net leverage, defined as net debt to adjusted EBITDA, was 2.81 times as of June 30th. We continue to operate within our long-term leverage target of 2 to 3 times. In terms of our funding capacity, we have ample capacity and financial flexibility under our current debt structure. We had $3.2 billion in total committed capital under our credit facilities as of June 30th. We had total availability of $841 million, comprised of $522 million available based on current ERC and $319 million of additional availability that we can draw from, subject to borrowing base and debt covenants, including advance rates.

Adjusted Eva represents what we believe to be a better view of our operational and financial progress and performance.

As a result of our strong cash collections growth,

And discipline expense management in recent quarters.

We have been able to accelerate adjusted EBITDA growth, which grew 20% this quarter versus the 13% growth in cash collections.

Our next leverage defined as net debt, to adjusted Ava.

Was 2.81 times as of June 30th.

We continue to operate within our long-term leverage target of 2 to 3 times.

In terms of our funding capacity, we have ample capacity and financial flexibility under our current debt structure.

We have 3.2 billion dollars in total committed Capital under our credit facilities, as of June 30th.

we had total availability of 841 million comprised of 522 million available based on current ERC and 319 million of additional availability that we can draw from subject to borrowing base and net covenants, including Advanced rates

Rakesh Sehgal: We have no debt maturities until November 2027 when our European facility matures, enabling us to continue supporting the growth of the European business and transforming our US business. We believe the cash generated from our business, the capital available under our credit facilities, and access to capital markets in both the US and Europe position us well to finance our operations, forward flow commitments, debt maturities, and additional portfolio purchases. During the second quarter, we saw another opportunity to enhance shareholder value and repurchased $10 million of our stock. Ideally, we would have repurchased more shares, but were constrained by limitations under our debt covenants, though we expect these constraints to ease somewhat as we move forward. We are always evaluating opportunistic ways to deploy capital with the highest returns to shareholders and will continue to do so going forward.

We have no debt maturities until November 2027, when a European facility matures, enabling us to continue supporting the growth of the European business and transforming our U.S. business.

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 position us to finance our operations, forward flow, commitments, debt maturities, and additional portfolio purchases.

During the second quarter, we saw another opportunity to enhance shareholder value and repurchased 10 million shares of our stock.

Ideally, we would have repurchased more shares but were constrained by limitations under our debt covenants, though, we expect these constraints to ease somewhat as we move forward.

We are always evaluating opportunistic ways to deploy Capital with the highest returns to shareholders and will continue to do. So going forward,

Rakesh Sehgal: Looking ahead, we expect to see more progress in our cash-based metrics through the back half of 2025, putting us on track to deliver on our purchase target of $1.2 billion, cash collections growth target of high single digits, and cash efficiency target of 60% plus for the full year. As we head into the next planning cycle, we will be reviewing our longer-term strategic outlook and expect to provide more substantial updates early next year. I'll now turn it back to Martin.

Looking ahead, we expect to see more progress in our cash-based. Metrics through the back half of 2025.

Putting us on track to deliver on our purchase target of $1.2 billion, cash collections growth target of high single digits, and cash efficiency target of 60% plus for the full year.

As we head into the next planning cycle.

We will be reviewing our longer term strategic Outlook and expect to provide more substantial updates early next year.

I'll now turn it back to Martin.

Martin Sjolund: Thanks, Rakesh. In summary, I'm excited about the road ahead. As we look out beyond the coming months and quarter, I see a tremendous opportunity to build on our positive momentum over the past couple of years to drive shareholder value. I recognize that our financial performance is not yet where we want it to be, but the team and I are committed to implementing the changes necessary to realize the company's full potential. Thank you for your continued support, and I look forward to engaging with all of you and hearing your input as we work to transform PRA. And with that, we'll open it up for questions.

Thanks rash.

In summary. I'm excited about the road ahead as we look out, beyond the coming months and quarter. I see a tremendous opportunity to build on our positive momentum. Over the past couple of years to drive shareholder value.

And I am committed to implementing the changes necessary to realize the company's full potential. Thank you for your continued support. I look forward to engaging with all of you and hearing your input as we work to transform. And with that, we'll open it up for questions.

Operator: 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 touchstone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the number two. If you're using a speakerphone, please flip the handset before pressing any keys. Your first question comes from the line of David Sharf from Citizens Capital Markets. Your line is now open.

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 1 on your touchtone phone.

You will hear a prompt that your hand has been raised.

Should you wish to decline for the following process? Please press star followed by the number 2?

If you're using a speaker phone, please lift the handset, before pressing any keys.

Your first question comes from the line of David Sharpe from Citizens Capital Markets. Your line is now open.

David Sharf: Hello. Good afternoon, and thanks for taking my questions. Hey, Martin, wondering if you could just provide some color in the US on supply and opportunity, not from the macro sense. We're obviously all aware of the elevated debt levels and the charge-offs that are rolling off. But can you just remind us how we ought to be thinking about the company's both volume of seller relationships and whether or not there are any new sellers in the pipeline that could impact purchase volumes, as well as whether there are new asset classes or non-credit card asset classes that might be growing that we should think about?

Um, hey Martin. Well wondering if you could, um,

provide some

color in in in

Us on. Um,

Flying an opportunity. Not not from the macro sense. We're we're obviously all aware of the elevated debt levels.

And the charge offs that are rolling off.

Um, but can you just remind us how we ought to be thinking about the companies?

both the volume of seller relationships and whether or not there are

Any new sellers in the pipeline that could impact purchased items as well as whether there are new asset classes. Um,

Non-credit card asset classes that might be growing that we should think about.

Martin Sjolund: Yeah, thanks. Thanks, David. I can make a few comments about that. As you kind of alluded to, the overall buying environment in the US we've described as elevated compared to sort of the longer-term baseline. So we see attractive opportunities to deploy capital here in the US. We have a global capital allocation framework that we use. So we are a global company, obviously, and we do look to optimize how we allocate capital between markets, so often balancing between Europe and the US. But generally speaking, the outlook for us is positive. You can see that in some of our multiples, and you can see that in the comments that Rakesh made about our target for the year. You also asked about alternative segments and relationships. My sense is that we have strong seller relationships here in the US that go back, in some cases, decades.

Martin Sjolund: So we continue to work closely with those large sellers in the core areas where we have good data and good experience. We are always looking for opportunities to expand as well, and we're aware that there are more segments out there and asset classes that could be interesting to us. What we would typically do is to start small in those areas and carefully test our way in there to build data, build operational capability, et cetera. So I definitely think that for the longer term, there's an opportunity there for PRA, but I would say in the near term, our focus is really on the core business, deploying the capital towards the targets that we have set for ourselves, and just making sure that the operational execution against that is where it needs to be.

Yeah, thanks. Thanks David. Um, I can make a few comments about that. Um as you kind of alluded to the the overall buying environment in the US, we've described as elevated compared to sort of the the longer term Baseline. So we see attractive opportunities to deploy Capital uh here in the US. Um we have a global uh Capital allocation framework that we use. So you know we are a global company obviously and we do look to optimize how we allocate Capital between markets so often balancing between Europe and the us. But generally speaking the the outlook for us is positive, uh, you can see that in some of our multiples and you can see that in the, uh, the comments that rakash made about our Target for the year. Um, you also asked about alternative segments and relationships. My sense is that we have strong seller relationships here in the US. That go back in some cases decades, um,

David Sharf: Got it. Understood. Thank you. And maybe just as a follow-up, I'll let others dig into the revenue side. But on the expenses, can you give us a sense for how we should think about kind of longer term, where you want the legal channel to be in terms of collection mix and how that factors into the sort of the ceiling on the cash efficiency ratio? Obviously, it's kind of a channel you only want to deploy after you determine an account has some ability to repay, but it is more expensive than the primary call center outreach. How should we be thinking about kind of that 60% level as a ceiling within the context of legal growing as a percentage of the mix?

So we continue to work closely with those large, uh, sellers, um, in the core areas where we have good data and good experience. We are always looking for opportunities to expand as well, and we're aware that there are more segments out there and asset classes that could be interesting to us. What we would typically do is to start small in those areas and carefully test our way in there to build data, build operational capability, etc. So I definitely think that for the longer term, there's an opportunity there for P, but I would say in the near term our focus is really on the core business, deploying the capital towards the targets that we have set for ourselves, and just making sure that the operational execution against that is where it needs to be.

Got it.

Let others dig into the revenue side. But on the expenses,

Can, can you give us a sense for how we should think about kind of longer term?

Where you want the legal channel.

Um, to be in terms of collection mix and and how that factors into the sort of the ceiling on the cache, efficiency ratio. Um, obviously it's kind of a, a channel, you only want to deploy after you determine an account as some ability to repay.

But it is more expensive than, you know, the primary call center outreach.

how how should we be thinking about kind of that 60% level as a sealing within the context of

Martin Sjolund: Yeah. I mean, as you pointed out, legal was we would never lead with legal. We would always try first, you know, over a longer period of time to set up account repayment options with customers in an amicable way. That's always our first option. However, you know, as you know, over time, if our data tells us that there is opportunity there and the customers aren't engaging with us, then we will go to the legal channel. The legal channel is important in all countries. I've been running Europe for the past seven years, and legal is a very important channel in those countries as well. In terms of your question for the US, we would always look to maximize the value of the legal investments that we make.

Martin Sjolund: So we have a very, I think, very sophisticated legal analysis that we do to understand the legal potential of an account, but also weighing that against the cost. And in terms of a ceiling, I don't really have a target in mind there. And you have to remember, a lot of this is about timing. So you typically incur significant legal costs earlier in the cycle, but then you can have a longer tail of cash collections over time. So we will always be weighing those two factions. So the legal investments depend both on the portfolio we have, what we attempt to maximize the value of each account, and then to implement that over time. So I think maybe, Rakesh, you can comment on the trajectory where legal opex at the moment is trending, but that's what I would say.

Legal channel is important in all countries. Uh, I, I've been running Europe for the past 7 years and legal is a very important channel, uh, in those countries as well. Um, in terms of your question for the us, we would always look to maximize the value of the legal Investments that we make. So we have a, you know, very I think very sophisticated legal, uh, analysis that we do to understand the, the, the legal potential of an account. But also weighing that against the cost.

Rakesh Sehgal: Yeah. David, to add to what Martin said, you know, first of all, I would say whenever we look at an account, we look at it on an NPV basis, and whether it is in the legal channel or it's in the call center channel, it has to work from an economic perspective on a net present value perspective. So we're always doing that analysis before we put accounts into the legal channel. Second, as Martin mentioned, we have significantly, over the last year plus, improved our processes, and we know that we're delivering greater value in terms of cash collections from the legal channel. And if you just look at where we were pre-COVID, that's a good data point. We were in the low 30s in terms of the cash we collected from the legal channel. And today, we are in the low 40s.

In terms of a of a sealing, I don't really have a Target in mind there. And and you have to remember a lot of this is about timing. So you typically incur significant legal costs earlier in the, in the cycle. But then you can have, you know, a longer tail of of cash collections over time. So we will always be weighing those 2 factions. So, the, the legal Investments depends, both in on the portfolio. We have the, what we, our attempt to maximize the value of of each account and then to implement that over time. So I think maybe reesh, you can comment on the trajectory where legal objects at the moment is trending. But that's what I would say. Yes. Um, David to add to what Martin said, you know? First of all, I would say, whenever we look at an account, we look at it on an NPD basis and whether it is in the legal Channel, or it's in the call center channel, it has to work from an economic perspective on a net, present value and perspective. So we're always doing that analysis.

Process before we put accounts into the legal channel. Second is, uh,

the Martin mentioned, we have significantly over the last year, plus improved our processes and we know that we're delivering greater value in terms of cash collections,

From the legal Channel.

And if you just look at where we were pre-covid, that's a good data point. We were in the low 30s, in terms of the cash we collected from the legal Channel.

Rakesh Sehgal: As we have continued to optimize that channel and investing in it, we expect to continue driving more cash from that channel. Now, as it relates to the opex side, we were at total across PRA at $89 million, growing to $125 million between '23 and '24. We expect, as I've mentioned on previous calls, that that growth rate of about 40% to moderate starting in 2025. And since you brought up the legal opex, you know, this quarter, legal opex was up only $2 million. That was a 7% year-on-year growth. When you look at it sequentially, it grew 12% versus the previous quarter. And as you look out to the rest of 2025, we expect that growth to be somewhere between 15% and 20%. And one of the reasons is we had a very strong buying environment in 2024.

And today we are in the low 40s. As we have continued to optimize that channel and invest in it, we expect to continue driving more cash from that channel. Now, as it relates to the Opex side, if we were at total across PR at $89 million, growing to $125 million between 2023 and 2024, we expect, as I've mentioned on previous calls, that that growth rate of about 40% will moderate starting in 2025. And since you brought up the legal Opex...

You know, this quarter legal Opex was up only 2 million, that was a 7% year-on-year growth.

Rakesh Sehgal: So you're starting to see all those accounts either going into now the legal channel or into the call center channel.

When you look at it sequentially, it grew 12% versus the previous quarter. As you look at the rest of 2025, we expect that growth to be somewhere between 15% and 20%. One of the reasons is we had a very strong buying environment in 2024. So you're starting to see.

All those accounts are either going into the legal channel or into the call center channel.

David Sharf: Understood. No, that cadence is very helpful. Thank you so much.

Operator: Your next question comes from the line of Mark Hughes from Truvest Securities. Your line is now open.

Your next question comes from the line of Mark Use from Truist Securities. Your line is now open.

Mark Hughes: Yeah. Thank you very much. Good afternoon. The collections overperformance, the 7% overall, was a nice improvement from Q1, both in Europe and the Americas. Can you talk about what drove that? Was that just more appropriate forecasts going into the quarter, or did you see some improvement in the overall market, or was it internal efforts were bearing more fruits?

Yeah, thank you very much. Good afternoon.

The, uh, collections overperformed the 7% overall.

It was a nice improvement from Q1, both in Europe and the Americas. Can you talk about what drove that? Was that just uh...

Uh, more appropriate, uh, forecasts going into the quarter or did you see some improvement in? Uh,

The overall, uh, market, or was it? Um, internal efforts were bearing more fruits.

Martin Sjolund: Yeah. Thanks, Mark. I agree that we're happy with the overperformance that we saw in Q2. Generally speaking, the European performance has been really strong for quite a period now. So I think there we're seeing, generally speaking, across most of the markets that cash is coming in stronger than we had originally projected. So I think that probably reflects a number of things, both operational initiatives that the teams are running, but also, I think, in some markets, a strong position of the consumer in those markets. And then finally, I think it's a signal of the underwriting, which has been maybe in some cases conservative, and we're seeing a strong.Performance

Yeah. Uh,

Operator: there. In the US, we're also pleased with the performance to be 3% above. I wouldn't attribute that necessarily to any specific thing around the forecast, but I would say that we're seeing strong performance from the various initiatives that have been rolled out here in the US. In particular, legal cash was up 24%. And I think that's a sign that the investments that we've been making in legal are bearing fruit and that the initiatives that the team here has been pushing are starting to generate results. You know, a couple of percentage points up and down in a quarter is there's going to be fluctuation. But generally speaking, I think we're in a good place.

Some cases, uh conservative. Um and we're seeing a strong performance there. Um, in the US we're also pleased with the performance uh, to be 3% above, I wouldn't attribute that necessarily to any specific thing around the forecast, but I, I would say that we're seeing strong performance from the various initiatives that have been rolled out here in the US. Um, in particular, legal cache was up 24%, and I think that's a sign that the Investments, that we've been making in legal, um, are bearing fruit and that the initiatives, that, that the team here has been pushing, um, are starting to generate results, you know, a couple of percentage points up and down in a in a quarter is is uh there's going to be fluctuation but generally speaking I think it we're in a good place.

Operator: Yeah. Mark, you talked about the reorganizing the structure in the US. Could you expand on that a little bit more? And are there any financial targets you've got associated with that?

Yeah.

Um, Martin, you talked about reorganizing the structure in the U.S.; could you, uh, expand on that a little bit more? And, uh, are there any financial targets you've got associated with that?

Operator: Yeah. So in the US, I mean, I'm only 60 days in or something, but obviously, I've been a member of the global team here for a long time. And one of the observations I've had is that the way we organize some of our European markets is different from the US. So the US had, on the operational side, a more functional setup, I would say, whereas in the European markets, we tended to have a more focus around the operation. And so one of the things, after discussing with the teams here, I concluded that there was an opportunity in our US structure to create a more empowered US operational team so that we have the different functions rolling up to the US operational leader. As I mentioned earlier, we have a very experienced leader here in the US.

Yeah, so in the US, uh, I mean, I'm only, you know, 60 days in or something, but obviously, I I I've I've been a member of the, the global team here for a long time. And 1 of the observations I've had, is that the the way we organize some of our European markets is different from the US. So the US had it on the operational side, a more functional setup. I would say, whereas in the, in the European markets we tended to have a more more focused around the operation. And so 1 of the things after discussing with the teams here, um I can

Operator: And by giving him different levers ranging from IT to data analytics to the other functions, I think we'll be able to create more accountability for cash performance, but also more accountability for cost. So this team is going to be measured on a single P&L. And I'm looking for speed in decision-making and speed in execution. In terms of specific metrics for that P&L, that's something we'll have to come back on internally later. We're just in the process of rolling this out now.

Included that there was an opportunity in our us structure to create a, a more empowered us, operational team. So that we have the different functions, rolling up to the US operational leader. As I mentioned earlier, uh, we have a very experienced, uh, leader here in the US and by giving him different levers, ranging from it to Dana analytics, to to the other functions. I think we'll be able to create more accountability for cash performance, but also more accountability for cars. So this team is going to be measured on a single p&l. Um, and I'm looking for Speed and decision, making and speed and execution. Um, in terms of specific metrics for that p&l, that's something we'll have to come back on, uh, internally later. Um, we're just in the process of rolling this out now,

Operator: Then on the 2025 multiples, in the US and the core paper ticked down just a little bit from, I think it was 218 to 214. In Europe, on the other hand, it ticked up. Anything to think about? Was the US market a little more competitive, or is that just a mix issue?

then on the, uh,

2025 multiples. Um,

In the US and the Core paper tick down, just a little bit from. I think it was 2:18 to 2:14.

In Europe, on the other hand, it picked up. Anything to think about was the...

Is the U.S. market a little more competitive, or is that just a mix issue?

Operator: Yeah, I'll let Rakesh comment on that. The only thing I would say is that money multiples are obviously an important proxy for how we're investing, but it doesn't necessarily always imply that a higher multiple is better. There's obviously a lot of other factors, including our efficiency and the time value of money that play in there. So that a multiple ticking up and down, again, it doesn't necessarily imply that. Mix is a big factor here too, but I'll let Rakesh comment on the specifics.

Rakesh Sehgal: Yeah, Mark, you're right. Look, it all comes down to a mix. Depending on whether we are buying more primary or secondary tertiary paper, that can have an impact. There are other demand-supply variables. But to Martin's point, at the end of the day, we are also taking into account the cost to collect and looking to drive net returns. We have a global investment framework. And whether it's a deal in Europe or different deals in the US, depending on type of paper, we're all looking at certain thresholds that they have to meet. So the headline number of purchase price multiple can vary depending on what it is that sellers are bringing to market also.

Yeah, unless rakhesh comment on that. The only thing I would say is that, you know, money multiples are obviously an important proxy for how we're investing, but it, it doesn't necessarily always imply that a higher multiple is better. Um, if we there's obviously a lot of other factors including our efficiency and a time value of money that play in there, so that multiple taking up and down. Again, it doesn't necessarily imply that, um, mix is a big factor here too, but I'll I'll let Rakesh comment on that the specifics

Yeah, Market, you're right. Look, it all comes down to mix, um, depending on whether we are buying more primary, secondary, or tertiary paper; that can have an impact. There are other, uh, demand-supply variables, but I do, Martin's point, at the end of the day, we are also taking into account, you know, the cost to collect and looking to drive net returns. We have a global investment framework, and whether it's a deal in Europe or different, uh, deals in the U.S., depending on the type of paper, we're all looking at certain thresholds that they have to meet. So, the headline number of purchase price multiple can vary depending on, you know, what it is that sellers are bringing to market also.

Operator: Thank you very much.

Thank you very much.

Najim Mostamand: As a reminder, if you have a question, please press star one in your telephone keypad. Your next question comes from the line of Robert Dodd from Raymond James. Your line is now open.

Uh, as a reminder, if you have a question, please press *1 on your telephone keypad.

Your next question comes from the line of Robert Dodd from Raymond James. Your line is now open.

Martin Sjolund: Hi, guys. Just kind of tied to that point. I mean, when we look at the purchase environment, if you look at the US market, obviously, versus say 23, the multiple is higher. The volume this year versus 24, obviously, 24 was a very strong year in the US. Volumes are down. So I mean, is it fair to say, I mean, you're focused on those higher multiple opportunities. So would it be fair to say that your peak purchasing is now in the rearview mirror? Is it that the focus on the higher multiples now is such that deployed volumes might be lower this year, next year, versus obviously the peaks of 23, 24? But the multiple mix is going to, in your view, more than make up for that. Any thoughts there?

Hi. Hi guys. Um just kind of tied to to that point. I mean when we look at the the purchase environment, if you look at the US market, obviously versus say 23, um your the most the multiples, higher the volume this year versus 24, obviously 24 was a very strong year in the US um volumes are down. So I mean, is it, is it fair to say? I mean you you're you're focused on those higher multiple opportunities. So would it be fair to say that? Like your Peak?

Multiples. Now is such that deployed volumes. Might be might be lower this year next year, um, versus obviously the pixel 2324 but the, the the multiple mixes is going to and you'll be more more than make up for that. Does that?

Any thoughts there?

Operator: Yeah, thanks. No, I would say that I wouldn't read too much into that. You know, we're obviously trying to strike a balance here between our leverage, the amount that we invest for the business, the multiples that we can get, et cetera. So there's a number of factors that are being traded off there. We had set out a plan that was based around these numbers that we talked about earlier, 1.2 billion. We felt that that was a good target for us. And that would allow us an opportunity to strike the right balance between returns and volumes. We never want to just chase volumes for the sake of chasing volumes. It's easy to deploy capital if all you do is chase the volumes in this business.

Operator: But I can tell you, after 10 years plus of managing our European business, there have been times where we've had to sit back and watch and just let other people take the volume because they haven't been able to meet our return thresholds. And it's always a mystery what other people are doing. We only can account for what we're doing. But I think it's healthy to set ourselves a target that allows us to strike that balance. And our goal is to maximize value, really, and for ourselves and our shareholders.

Yeah, thanks, no. Um, I I would say that the, um, I wouldn't read too much into that, um, you know, we're obviously trying to strike a balance here between, you know, our leverage, the amount that we invest for the business, the multiple that we can get Etc. So, there's a number of factors that are being traded off there. Um, we had set out a plan that was based around these numbers that we talked about earlier, 1.2 billion. We felt that that was a good Target for us and that would allow us an opportunity to, you know, to strike the right balance between returns and volumes. We we never want to just Chase volumes for the sake of chasing volumes. It's easy to deploy Capital. If all you do is Chase the volumes in this business. But I can tell you after 10 years plus of managing our European business, there have been times where we've had to sit back and watch. And, and, and just let other people take the volume because they haven't been able to meet our, uh, our return thresholds. And, you know, it's always a mystery, what other people are doing, we only can account for

What we are doing but I think it's healthy to set ourselves. A Target that allows us to strike that balance. And our goal is to is to maximize value really and for uh, for ourselves and our shareholders.

Martin Sjolund: Got it. Got it. Thank you. And then on kind of the five indicators of focus, right? I mean, three of those seem to me to, well, arguably four, to be very cost-focused, right? Restructure the US business, cost of operations, technology improvements, et cetera, review the overhead. I mean, if you were, and I'm not asking you for cash efficiency guidance or anything, but I mean, are the kind of cost-saving initiatives and components of that, I mean, is that 50 basis points of efficiency improvement over some long period of time? Obviously, cash, you know, with legal and things move around. But is it 50 basis points? Is it 200 basis points? How much cost do you think, and restructuring and efficiency, how much is in there that you think you can take out over the longer period? I mean, is it going to be some talking points?

Got it, got it. Thank you then on kind of, you know, the five. Um,

Uh, indicators Focus, right? I mean, 3 of those, um, seemed to me to were arguably 4 um, to be very cost-focused, right? Restructure the US business cost of operations technology improvements, Etc. Review the overhead. I mean if if you were

And I'm not asking you for cash, efficiency, guidance, or anything, but I mean, are there kind of cost-saving initiatives and components of that? I mean, is that...

50 basis points of, uh,

Efficiency improvement over some long period of time. Obviously cash, you know, with legal and things, moves around. But is it 50 basis points? Is it 200 basis points? How much?

Cost, do you think in restructuring and efficiency, how much is in there that you think you can take out?

Martin Sjolund: Are we going to see it in the numbers?

Um, over the the the longer period, I mean, is it is this he he is it going to be some talking points. Oh, are we going to see it in the numbers?

Operator: Yeah, thanks, Robert. I wouldn't necessarily say that they're all cost-focused. You know, the US restructuring is more about speed of execution and operational execution capability, really. So I wouldn't necessarily say that cost is driving that one. But obviously, the one that is, and the other one, sorry, is the technology side. Of course, we're looking to leverage technology to help us with cost. But there are also other operational capabilities that we need to invest in on the technology side. But coming to the last point around the cost side, as I said in the script earlier, this is going to take time, and we're not expecting to see immediate impact on the numbers. And I think it's worth calling out also, the way I think about it is there's two main dimensions to cost, really, in our business.

Operator: One is the operational cost, and that's things like optimizing our automation of legal, for example, or leveraging offshore call centers to reduce that cost. That's like operational cost. But the other side of it is the overhead and corporate costs. And so the initiative that I mentioned earlier as a specific focus is really focused on the second one of those, the overhead and corporate costs. That cost, as a percent of the overall cost, is relatively small. You know, the bulk of our cost is for the actual collections cost. So I think it's too early to put a number, and I wouldn't put massive expectations on this initiative as such. But I did want to call it out because it shows the importance that I place on cost. I've always done that in our European business.

Yeah, thanks Robert. I I wouldn't necessarily say that they're all uh cost focused. You know, the the US restructuring is more about speed of execution and operational, uh, execution capability really. So I wouldn't necessarily say that cost is driving that 1, um, the uh, but obviously the 1 that is so and the other 1, sorry, is the technology side. Of course, we're looking to leverage technology to help us with cost, but there are also other operational capabilities that we need to invest in on the technology side. Um, so but coming to the last Point, around the call side, as I said in the script earlier, the I this is going to take time and we're not going to we're not expecting to see immediate impact on the numbers. And I think it's worth calling out. Also, the way I think about it is there's 2 main Dimensions to cost really in our business. What is the operational cost to match things like optimizing? Uh, our automation of of legal, for example, or leveraging offshore?

Our call centers to reduce the, the that cost that's like operational cost, but the other side of it is the overhead and corporate costs. And so the, the initiative that I mentioned earlier um as a specific focus is really focused on the second 1 of those the overhead and and corporate cost.

Operator: We think we've built one of the most cost-efficient platforms in the industry there, and I will certainly be focusing on cost here in the US as well.

Martin Sjolund: Got it. Thank you.

That cost as a percent of the overall cost is relatively small. You know, the bulk of our cost is for the actual collections cost. So I I I think it's too for it's too early to to put a number and I I don't wouldn't put massive expectations on this initiative as such, but I did want to call it out because it shows the importance that I place on cost. I've always done that in our European business. We we think we've built 1 of the most cost efficient Platforms in the industry there. And and I will certainly be focusing on cost here in the us as well.

Got it. Thank you.

Najim Mostamand: As a reminder, if you have any questions or any follow-up, please press star one in your telephone keypad. There are no further questions at this time. I will now turn the call over to Martin Sjolund. Please continue.

I said, reminder, if you have any questions or any follow-up, please press star 1 on your telephone keypad,

The Martin scholand. Please continue.

Operator: Yeah, thank you. So all I'd say is that I'm very excited about the road ahead for PRA. I think we have a great opportunity. I'm excited about the team, and I just want to thank everybody for your continued support, and I look forward to working with you all going forward. So thank you.

Yeah. Uh, thank you. So, uh, all I'd say is that, uh, I'm very excited about the road ahead for P. I think we have a great opportunity. I'm excited about the team, and I just want to thank everybody for your continued support. I look forward to working with you all going forward. So, thank you.

Najim Mostamand: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.