PRA Group Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
August 5, 2024

There are 7 speakers on the call.

Operator

Good evening, and welcome to PRA Group's Second Quarter 20 24 Conference Call. All participants will be in a listen only mode. Please note this event is being recorded. I would now like to turn the call over to Mr. Najeeb Mostamand, Vice President, Investor Relations for PRA Group.

Operator

Please go ahead.

Speaker 1

Thank you. Good evening, everyone, and thank you for joining us. With me today are Vikka Tal, President and Chief Executive Officer and Rakesh Segal, 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.

Speaker 1

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 Relations section of our website at www.pragroup.com. 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 2024 and Q2 2023, unless otherwise noted and our Americas results include Australia.

Speaker 1

During our call, we will discuss adjusted EBITDA and debt to adjusted EBITDA for the 12 months ended June 30, 2024 December 31, 2023. 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 these non GAAP financial measures. And with that, I'd now like to turn the call over to Vikka Tal, our President and Chief Executive Officer.

Speaker 2

Thank you, Najeeb, and thank you everyone for joining us this evening. The Q2 was another important step in demonstrating the turnaround in our U. S. Business, delivering against our financial and operational targets for 2024 and positioning the company for future growth. Our net income for the quarter reflects the progress we have made in executing the turnaround with speed across a broad set of initiatives.

Speaker 2

Perhaps most compelling is the fact that we delivered these results while absorbing both higher operational and funding costs to support portfolio growth. Additionally, our results reflect the increased investment we have made in our U. S. Legal collections channel, which we believe positions us well for future cash generation. We invested $379,000,000 during the quarter with pricing remaining attractive globally.

Speaker 2

Cash collections grew 13% year over year, primarily reflecting higher recent purchases and the positive impact of cash generating and operational initiatives in our U. S. Business, along with continued cash collections growth in our European business. With the stabilization of our U. S.

Speaker 2

Business in 2023 and the demonstrated progress on our turnaround efforts, we are focused on sustaining the business momentum through the balance of the year and driving growth as we transition into 2025. In a moment, I'll provide some updates on this front. But before I do, I wanted to share that we are celebrating the 10 year anniversary of our acquisition of Active Capital in 2014. This transformative acquisition elevated us from primarily a U. S.-based player to a truly global enterprise with a diverse European footprint.

Speaker 2

Since then, our global presence has enabled us to shift capital across the world to respond to differing investment opportunities. It has also offered us critical geographic diversification, so that we can hedge against local economic issues, consumer health and competition. In addition to the benefits of having a global presence and diversification, the Active Capital acquisition provided us with incredible talent that continues to be an asset to our teams and contributes to our culture worldwide. I've had the privilege to witness firsthand the success of our European business, which has been in contrast to some of our peers who have faced sizable challenges. Our growth has been predicated on several key elements, including management stability, market diversification, deep seller relationships, investment discipline, both organically and inorganically, a focus on operational execution and a strong capital position.

Speaker 2

We expect these attributes to drive continued success for the company. Like Active in Europe, for many years now, we have had a highly successful operation in Brazil. Using partnerships both with highly experienced local operators and with a major Brazilian bank, we have been able to opportunistically invest in a significant amount of receivables during those years, realizing highly attractive rates of return. Our success in Brazil reflects years of work and strategic positioning in a market that has proved difficult for others. Shifting gears, I'll now provide an update on the turnaround in our U.

Speaker 2

S. Business and the areas we are most focused on to rebuild profitability, drive growth and enhance shareholder value. As a reminder, this roadmap is supported by 3 pillars. 1st, optimizing investments, which allows us to increase ERC and portfolio returns 2nd, driving operational execution, which focuses on maximizing cash collected per dollar invested and third, managing expenses, which is geared towards optimizing our cost structures. 1st, optimizing investments.

Speaker 2

In the U. S, we continue to capitalize on the strong levels of portfolio supply driven by higher industry credit card balances and rising delinquency and charge off rates. More consumers are relying on credit to manage a higher interest rate environment and cost of living increases, which in part has led to credit card balances growing more than 20 percent to $1,100,000,000,000 as of the latest data, up from $850,000,000,000 pre pandemic. As the chart shows, there has been a long term secular trend in industry credit card balance growth, while charge off rates, although up from pandemic era lows, are now trending around a 10 year average. Portfolio supply is driven by both charge off rates as well as the absolute level of credit card balances.

Speaker 2

Based on this, we anticipate continued growth in portfolio supply for the balance of this year. Further, as there is typically a lag between sellers charging off receivables and making portfolios available for sale, we believe the U. S. Supply tailwinds will extend well into 2025. It's important to note also that the cash expected to be generated from our recent portfolio purchases is only modestly contributing to this year's results and we expect to see more of an impact beginning next year.

Speaker 2

In Europe, we achieved a record amount of investment for any given Q2 in our history, which Rakesh will go into more detail later. Turning now to the 2nd pillar, driving operational execution. We are fundamentally changing the way we drive collections in both existing and new portfolios. As previously noted, our new Global Operations Officer, Steve Mackey, joined us in late April and he has hit the ground running. In our U.

Speaker 2

S. Call centers, we have made critical and incremental enhancements to our operating processes during the quarter, including simplifying connector workflows and rebalancing calling intensity. Ultimately, it's a matter of increasing the number of customers we are able to reach and improving the outcomes of these conversations, and we are very encouraged by the progress thus far. Although we have now made a number of meaningful operating improvements that are driving improved cash collections and operating results, we continue to identify further opportunities to build our processes towards being state of the art. As I first started talking to you about a year ago in the legal channel, we have been generating incremental cash collections by leveraging both internal resources and expanding our use of external resources.

Speaker 2

The enhancement to our U. S. Legal processes is demonstrated in part by the growing number of wage garnishment filings beginning in the second half of twenty 23 and continuing into the current year. Post judgment execution is just one of many areas within the legal collections channel that we have focused on optimizing for cash generation. We expect these much needed process improvements to generate continued value over the next several quarters for our existing book of business as well as producing incremental value to new purchases.

Speaker 2

This same phenomenon is true of our other operating improvements as well. The 3rd pillar to our business turnaround is managing expenses and in particular reducing the minor cost of Grain business. The increased level of buying in the U. S. Has required an expansion of our total call center staffing by approximately 50% compared to a year ago.

Speaker 2

To counter the expense impact associated with this increase in portfolio purchases, we are focused on call center offshoring initiatives, which we initiated in the fall of 2023. We are highly encouraged that in this relatively short period of time, we have onboarded teams in 2 separate low cost locations in Asia. Today, more than 25% of our collectors supporting the U. S. Business are based offshore and we expect this proportion to increase over time.

Speaker 2

In addition to the absolute level of expense savings, we expect that our outsourcing initiatives will help us enhance our calling strategies and better navigate the cyclical nature of our industry. In summary, the initiatives we shared last year are well underway and are delivering results at or above expectations, giving us a solid platform for future growth. And with that, I'll turn it over to Rakesh for a financial summary of our 2nd quarter results.

Speaker 3

Thanks, Vik. We purchased $379,000,000 of portfolios during the quarter, up 16% year over year, representing our 3rd highest quarterly level stretching back 5 years. In the Americas, we invested $225,000,000 in the quarter, up 23% year over year. In the U. S, we deployed $207,000,000 up 42% year over year.

Speaker 3

The increase was primarily driven by higher portfolio supply as reflected in the monthly amounts purchased under our existing and renewed forward flow arrangements. This was supplemented by additional forward flow and spot purchases as we successfully expanded our seller relationships over the last 12 months. Looking at pricing during the Q2, our 2024 Americas core purchase price multiple finished the first half of the year at 2.11 times. This is consistent with the end of the first quarter and reflects the attractive pricing in the U. S.

Speaker 3

Market today, along with our focus on improving net portfolio returns. Turning to Europe. We invested $154,000,000 across every major market. Similar to the U. S, we have continued to expand seller relationships in Europe, which contributed to the robust investment volumes realized this quarter.

Speaker 3

Since Europe is primarily a spot driven market, volumes are dependent on seller strategies and timing. In the U. K, which is our largest market outside the U. S, we continue to benefit from our long standing seller relationships with stable forward flow volumes. We also have a strong presence in Poland and in the Nordics.

Speaker 3

In contrast, Southern Europe remains intensely competitive and we are being selective with our investments, which is illustrated by the fact that these markets make up less than 5% of our total ERC. Overall, we continue to exercise discipline, while also keeping an eye out for new opportunities. Moving on to our financial results. Total revenues were $284,000,000 for the quarter. Total portfolio revenue was $283,000,000 with portfolio income of $209,000,000 and changes in expected recoveries of $73,000,000 As a reminder, portfolio income is the yield component of our revenue.

Speaker 3

You can see on the chart on the left that portfolio income has grown for the 4th consecutive quarter, driven primarily by higher recent purchases and improved pricing, especially in the U. S. We expect this trend to continue over the next several quarters. Turning to the chart on the right. In addition to portfolio income, our total portfolio revenue includes changes in expected recoveries, which encompasses a combination of cash over performance or underperformance in the current period and the net present value of changes in our ERC.

Speaker 3

Over time, as the chart shows, we have modestly over performed our cash collection expectations, which results in both cash over performance and where appropriate a change in ERC. The changes in expected recoveries this quarter reflected cash over performance of $54,000,000 with strong over performance in the U. S. And Europe. In the U.

Speaker 3

S. Specifically, the over performance was due in large part to the impact of our cash generating initiatives. While these initiatives are expected to continue generating incremental value, we expect the level of cash over performance to moderate from the levels achieved in the second quarter. The remaining $19,000,000 of changes in expected recoveries reflected the net present value of changes in our ERC, with the majority of this increase associated with our U. S.

Speaker 3

Portfolios. During the quarter, cash collections exceeded expectations on a consolidated basis by 12%, with the Americas over performing by 10% and Europe over performing by 14%. Our year to date cash collections versus our expectations at December 31, 2023 experienced 10% over performance on a consolidated basis, with the Americas over performing by 9% and Europe over performing by 10%. Operating expenses for the quarter were $195,000,000 which were up $6,000,000 sequentially and up $31,000,000 from the prior year period. These increases are primarily tied to the investments made in our U.

Speaker 3

S. Legal channel to drive future cash growth over a sustained period of time. Legal collection costs were up $14,000,000 year over year, driven primarily by investments in our U. S. Legal channel and to a lesser extent by increased legal collections activities in Europe.

Speaker 3

Legal collection costs largely consist of court costs paid upfront to file lawsuits. As you can see on this slide, there is a timing lag between the initial legal investment and the resulting cash collections, which generally commence 3 to 6 months post judgment and continue over the following 2 to 3 years. We expect the investments we are currently making in our U. S. Legal processes to drive incremental cash collections over the next several years.

Speaker 3

For 2024, we expect the level of legal collection spending to moderate in the second half of the year. While upfront legal costs may have a negative impact on cash efficiency in the short term, Given the lag in cash generation, we believe it is the appropriate action for those customers who choose not to engage with us voluntarily since this delivers optimal value over the long term. Compensation and employee services expenses increased $8,000,000 primarily due to $6,000,000 of atypically lower compensation accruals recorded in the prior year period. This quarter's amount was in line with the low $70,000,000 range we have experienced over the past couple of quarters. As mentioned, we are benefiting from leveraging 3rd parties and our offshore call centers, which have helped us absorb the costs associated with a significant increase in account volumes and customer contacts.

Speaker 3

Legal collection fees increased $4,000,000 driven mainly by higher external legal collections within our U. S. Core portfolio. Our cash efficiency ratio was 59% for the 2nd quarter compared to 61% in the prior year period. As mentioned, the primary driver for the year over year decline was legal collection costs.

Speaker 3

Net interest expense for the 2nd quarter was $55,000,000 an increase of $12,000,000 reflecting increased interest rates and higher debt balances due to increased portfolio investments. Our effective tax rate for the quarter was 26%. We expect our effective tax rate to be in the low to mid-twenty percent range for 2024 depending on income mix and other factors. Net income attributable to PRA was $22,000,000 or $0.54 in diluted earnings per share. Cash collections for the quarter were $474,000,000 up 13% from the prior year period.

Speaker 3

Americas cash collections increased 18%, driven by higher collections in the U. S, which were up 20% due to higher portfolio purchases and the positive impact of our cash generating initiatives. European cash collections increased 6%, driven primarily by higher recent purchases. With respect to financial pressures on the U. S.

Speaker 3

Consumer, we believe that certain customer segments are experiencing stress from high interest rates and continued inflation as it is generally taking longer for some of our customers to pay off their balances. However, we are seeing significant growth in the number of committed payment plans from our customer base. We also believe our cash generating initiatives can help mitigate pressure that might build as economic circumstances evolve. The European consumer environment reflects some of the same economic factors. However, we are also experiencing some positive trends with the proportion of paying customers continuing to remain stable.

Speaker 3

In addition, larger payments in the markets that were previously impacting are starting to show signs of improvement. ERC at June 30 was $6,800,000,000 which was up 15% compared to $5,900,000,000 at June 30 last year. On a sequential basis, ERC increased $304,000,000 We expect to collect $1,600,000,000 of our ERC balance during the next 12 months. It's important to note that this number only reflects the amount we expect to collect on our existing portfolio. It does not include the cash we expect to collect from new purchases made over the next 12 months.

Speaker 3

Based on the average purchase price multiples we recorded year to date, we would need to invest approximately $831,000,000 globally over the same timeframe to replace this runoff and maintain current ERC levels. Keep in mind that this replenishment amount decreased since last year because our multiples have improved over that time period. We expect that we can exceed this investment level and continue growing ERC during the remainder of 2024. Our debt to adjusted EBITDA was 2.92 times as of June 30, which remains within our long term target range of 2 to 3 times sustained leverage. Our leverage over the last few quarters reflects the higher level of portfolios we purchased during this time period.

Speaker 3

We have covenants in our revolving credit facilities that limit our leverage ratio to 3.5 times debt to adjusted EBITDA and we are within that limit. During periods of higher portfolio investments, as we are currently witnessing, the leverage ratio would be expected to increase and then decrease over time as we start to generate cash from those portfolios. In terms of our funding capacity, we have $3,100,000,000 in total committed capital to draw under our credit facilities. In all three of our credit facilities, we have deep and long standing banking relationships. Our bank lines have margins ranging from 235 to 380 basis points over benchmark that provide an attractive cost of capital.

Speaker 3

As of June 30, we had total availability of $1,400,000,000 comprised of $742,000,000 based on current ERC and $707,000,000 of additional availability that we can draw from subject to borrowing base and debt covenants including advance rates. During the quarter, we issued $400,000,000 of our senior notes due 2,030, the proceeds of which we used to repay borrowings under our North American revolving credit facility. We intend to use borrowings under that facility to redeem our $298,000,000 senior notes due 2025 on or about September 1 this year. We are very pleased with the success of the transaction and how it enabled us to create additional capital for portfolio purchases. As we look toward upcoming maturities, refinancing our North American and UK credit facilities due July 2026 remains a high priority.

Speaker 3

We believe the capital available under our credit facilities, the cash generated from our business and access to capital markets in both the U. S. And Europe position us to take advantage of the continued build in portfolio supply. With that, I'll turn it back to Vik. Thanks, Rakesh.

Speaker 2

As seen by our financial and operational results in the first half of this year, we are continuing to push the ball forward with our initiatives remaining well on track. We are highly encouraged by the overall progress thus far, recognizing that it will take some time to see the full fruition of our efforts. Looking ahead, our 2024 targets are outlined on this slide with the following additional commentary. First, we continue to expect portfolio investments to remain strong through the balance of this year. Cash collections in the first half of this year have already grown double digits compared to the prior year period, and we expect to sustain this level for the full year.

Speaker 2

We are also expecting cash efficiency to be closer to the 60% mark for the full year. This reflects improved strategies and processes driving operational effectiveness as well as the increased investment in legal collection spend through the year to drive future cash growth. And lastly, we continue to expect RoATE to range between 6% to 8% for the full year. While it is still too early for us to precisely forecast how this metric will evolve through an entire business cycle, we expect to see additional uplift beyond this range as we move into 2025. In closing, I am really proud of our team and how we have been able to accomplish so much in such a short amount of time.

Speaker 2

We are working hard to drive positive momentum in our U. S. Business, continue to benefit from the strength of our European and Brazil business and achieve greater profitability as we move into the future. Thank you, as always, for your continued support. And with that, we are now ready for questions.

Operator

Thank you. Ladies and gentlemen, we will now begin the question and answer Your first question comes from the line of David Scharf from Citizens JMP. Your line is now open.

Speaker 4

Thank you. Good afternoon and thanks for taking my questions. Notwithstanding what was clearly some very strong collection performance and obviously you exceeded expectations. I'm kind of obligated to focus on the state of the U. S.

Speaker 4

Consumer just based on kind of market sentiment right now. First off, Rakesh, I just wanted to clarify your qualifier regarding some stress from inflation and high rates on the U. S. Consumer, Was that a new comment? Was this something incremental?

Speaker 4

I can't recall because obviously we've been hearing that from lenders we cover for the better part of the last year. Was that incremental versus Q1 or is that just kind of a reiteration in the cautionary disclosure?

Speaker 3

Yes. Look, David, good to hear your voice again. It is a reiteration of what we've mentioned previously. So what we're seeing is that we have different strategies to counter any stress that consumers may be facing. And there's a cumulative impact of the inflation that's been building up over time.

Speaker 3

We believe that the cash generating initiatives that we've been undertaking both in the call center as well as on the legal channel, Those are strategies that we can employ to counter and mitigate some of the pressures that the consumer may be impacted by. What we are also very encouraged by in the U. S. In particular, I mentioned in my comments is that we're seeing that the number of payment plans are increasing and that is a positive from our perspective. And if I just switch to Europe for a second, we're starting to see some positive news.

Speaker 3

In the past, I'd always said that the proportion of paying customers has remained stable and we continue to see that. But one of the positive trends that we've seen in this past quarter was that the larger payments that had previously been impacted was starting to show signs of improvement. So overall, what I would say is that the data that's come out in the market, you're seeing it real time as we are. It's just a few data points in the last few days here. But overall, we're taking a much longer term view.

Speaker 3

We'll continue to monitor the new data that's come out just like you would David. But overall sitting here today, we've seen some positive impact in Europe with our consumers and in the U. S, we're taking advantage of all the cash generating activities to mitigate any pressure. But at the end of the day, we take a very long term view in terms of our cash collections. As you know, it goes out over 10 plus, 15 years, perhaps in certain countries in Europe even longer.

Speaker 4

Got it. No, no, that's very helpful, Rakesh. I mean, it sounds like you're not really signaling that you've seen any leading indicators of increased stress yet in the U. S. Hey, maybe as a follow-up, switching to the expense side and specifically kind of collector productivity, It's a pretty remarkable statistic now that over a quarter of U.

Speaker 4

S. Collections are being serviced offshore. Is there any way you can

Speaker 5

help quantify or

Speaker 4

at least frame for us on a relative basis what the cost is to collect a dollar from your offshore sites versus what it is in the U. S? Just as well as what your plans are ultimately for what percentage of your U. S. Collections will come from overseas collectors?

Speaker 2

I'll take that, David. This is Dick. I think taking the second half of your question, we're building up our overseas and our offshore collections. The general learning in the industry is that it takes between 6 12 months, maybe 9 to 12 months for a collector to get seasoned, right. So none of the collectors that we have in our offshore locations have had 9 months of experience, right.

Speaker 2

So we're going to watch and track effectiveness and full performance and stability of those relationships over certainly the balance of this year before we decide how much further to ramp that up. Directionally though, I think we would like to see continued build in our overseas proportions over time, TBD as to where they normalize it out. In terms of the cost differential, we don't disclose that, but I would say to you it's a meaningful differential, which is what led us to evaluating this alternative, right.

Speaker 4

Got it. Understood. Thanks so much.

Operator

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

Speaker 5

Yes, thanks. Good afternoon.

Speaker 3

Hey, Mark.

Speaker 5

Hello. When we think about the pricing here, yes, can you hear me?

Speaker 2

Yes, sure. Hi, Mark.

Speaker 5

Excellent. Very good. When you think about pricing, the collections multiple in the U. S. Was steady Q1 to Q2, the 2.11 times.

Speaker 5

Are we at kind of a stable point, do you think, in terms of pricing or if supply continues to increase for the balance of the year and I think you described in the next year, then do you think that pricing has the opportunity to improve?

Speaker 2

I think it's difficult for us to opine on forward pricing. Obviously, in the U. S, we have, as you know, a finite or up to now a finite set of buyers, right, with significant access to capital, right? So in that regard, if there's a further change in the supply demand equation, that might naturally lead to improve pricing. But at this point in time, it depends really on what files are coming to market, the age of the files, the mix of the files.

Speaker 2

So I think it's we I would be hesitant to project changes in the multiples or signal that changes in the multiple would be part of our equation going forward till we see it happening.

Speaker 3

And Mark, what I would just add is, look, we're winning our fair share of the deals. It's a function of supply demand, as Vik mentioned. It's also mix that comes into play. But look, we're very encouraged. If you just look at the trend over the last couple of years, we've gone from a multiple of 1.75 times in 2022 to 1.97 at the end of 2023 and we're continuing to build on that.

Speaker 3

So more to come as we see the supply story unfold in the second half of this year.

Speaker 5

Understood. And then just the overall level of supply in Europe, I think you talked about your expanded seller relationships. It's more spot driven. But could you comment on kind of what you're seeing in terms of just the volume of deals that are out there?

Speaker 2

Look, I think that as we've said and you're I'm sure very familiar with this, Mark, right. We have better visibility to the ongoing supply trends in the U. S. Than we have in Europe just because of the very high propensity of Europe to be spot driven. And that's what really drove a meaningful uptick in volumes coming to market in the 2nd quarter versus what we've seen.

Speaker 2

I think Rakesh was a much softer number in the Q1, right. So I and Rakesh are not have got limited visibility to being able to predict what's going to happen in the spot market in the Q3 and certainly even less in terms of what's going to happen in the Q4.

Speaker 3

Yes. Look, I agree with you. But if I can just add to the point around Q1, we were at $49,000,000 versus $154,000,000 this quarter. Again, it depends on seller strategies also and it's we know it's a spot driven market. But Mark, where we get always encouraged is we know that we're in dozen plus countries in Europe.

Speaker 3

There are so many moving pieces. Our goal is to ensure we are engaging with all the sellers and ensuring that we're winning the fair share of deals coming to market.

Speaker 5

Yes. And then your guidance on the efficiency ratio, I think last quarter you talked about 60% plus and I think here you're talking about approximately 60%. It was pretty striking that you increased your spending in the legal channel and definitely understand that there's a delay on that on the cash collections. Is the change in the efficiency outlook, I mean, is that essentially the stepped up investment versus what you had previously anticipated? Is that the right way to look at it?

Speaker 2

Yes. I think in general, it is linked to principally to the larger volume of investment we've made in our legal channel. And that's not due to any change in strategy with regard to what we have determined qualifies for legal, it's really a function of the volume of accounts that have flowed into a channel, the speed at which we are managing the accounts through all of the different stages of the legal funnel, so to speak, as well as relative to our prior projections, the mix of accounts that we believe qualify for legal placement in terms of our legal placement strategy is higher than we had originally projected. That's just a function of the mix of what we have happened to have bought. So all of those have put a have been parlayed in to our view with regard to where the efficiency metric will net out for this year.

Speaker 2

But I think as we point out, that's a function of spending now for tangible cash collections to come in the future.

Speaker 3

Yes. And Mark, all these investments that we're making, right, they have to meet our internal return threshold. So we're obviously taking that into account. And just for context also, as you think about the targets and the metrics that we have, the 6% to 8% on ROATE that takes into account these expenses, we haven't changed that. And when you look at the 60 plus versus 60 target,

Speaker 6

when you

Speaker 3

look at just our cash collections annualized, so in the first half, it's about $900,000,000 you annualize that $1,800,000 1% change in cash efficiency would have like $18,000,000 impact and that's the investment that we're making into our legal channel. So at the end of the day, and we mentioned this previously, the cash efficiency is really an output of all the investments that we're making and we think that it's the appropriate action for us to invest in the legal channel given the value that we get from those

Speaker 5

investments. Understood. Thank you.

Operator

Your next question comes from the line of Sean Paul Adams from Raymond James. Your line is now open.

Speaker 6

Hey, guys. Good evening. Circling back to Europe, I know you guys mentioned that a lot of the supply is kind of driven by the spot market. But last quarter, you kind of talked about a little bit about stage 2 loan levels on bank balance sheets. If you could share a little bit color on that for this quarter, as well as the level of competition related to the pricing, what kind of value you guys are getting in relation to the pricing?

Speaker 6

I know you guys said that it was a very competitive market in Europe.

Speaker 3

Yes. Look, we obviously monitor the Stage 2 level loans. But at the end of the day though, they have to the sellers have to focus on what they think is appropriate for them to bring to market. We obviously are still encouraged by what we saw this quarter. We continue to engage with them.

Speaker 3

But at the end of the day, it's their decision when they bring to market. So our goal is to ultimately ensure that we are pricing deals that come to market appropriately. We know that from a competition perspective, competition continues to be pretty healthy notwithstanding some of the pressures that we are seeing some of our peers under, we continue to see a pretty healthy competitive environment. And Vic, if you want to add something to that?

Speaker 2

No, I think from a forward flow standpoint, I think you mentioned, Rakesh, in your remarks, right, that the forward flow volumes remain pretty stable, right? So I think we're not seeing any change in strategy from our perspective or from the competition, and we just got to wait and see when the supply comes to market.

Speaker 6

Got it. Thank you. That's very helpful. Additionally, can you share any additional color on cash collection characteristics between the individual portfolio vintages in the U. S.

Speaker 6

Market? And has there been a decline in proportions of customers voluntarily repaying debt, specifically between individual vintages?

Speaker 2

I don't think we've disclosed that and we haven't talked about it. I think you can there is information that you can see in our materials, right, about the cash plans on different businesses.

Speaker 3

Yes. I think yes, you look at what I would just say, Shantanu, is just focus on a couple of things. We mentioned around our older vintages. We've been seeing significant over performance in our older vintages, which leads us to believe that our cash initiatives are bearing fruit. So that's one piece.

Speaker 3

And then the other piece that I mentioned just in my comments is that we're seeing customers pay over a longer period of time. That's not vintage specific. So but our view is that's more a timing issue, just that the payments are coming in over a longer period of time.

Speaker 6

Got it. Thank you so much. Yes, I've seen that there's been differences in the income for consumers, the income brackets and issues regarding repayment among the different income brackets. So that was the source of the question. Thank you very much for the color.

Speaker 3

Thank you.

Operator

There are no further questions at this time. I will now turn the call over to Mr. Vik Atal for final comments.

Speaker 2

Thank you everybody for joining us today. And obviously, thank you for your support and a lot more to look forward to in the second half of this year. Thank you.

Operator

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

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