NASDAQ:PRAA PRA Group Q1 2025 Earnings Report $13.63 -0.18 (-1.30%) Closing price 05/23/2025 04:00 PM EasternExtended Trading$13.64 +0.01 (+0.07%) As of 05/23/2025 04:06 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. ProfileEarnings HistoryForecast PRA Group EPS ResultsActual EPS$0.09Consensus EPS $0.41Beat/MissMissed by -$0.32One Year Ago EPS$0.09PRA Group Revenue ResultsActual Revenue$269.62 millionExpected Revenue$288.63 millionBeat/MissMissed by -$19.01 millionYoY Revenue Growth+5.50%PRA Group Announcement DetailsQuarterQ1 2025Date5/5/2025TimeAfter Market ClosesConference Call DateMonday, May 5, 2025Conference Call Time5:00PM ETUpcoming EarningsPRA Group's Q2 2025 earnings is scheduled for Monday, August 4, 2025, with a conference call scheduled at 4:00 PM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by PRA Group Q1 2025 Earnings Call TranscriptProvided by QuartrMay 5, 2025 ShareLink copied to clipboard.PresentationSkip to Participants Operator00:00:00Good evening, and welcome to PRA Group's First Quarter twenty twenty five Conference Call. All participants will be in a listen only mode. After today's presentation, there will be opportunity to ask questions. To ask a question, you may press star then the number 1 on your touch tone phone. To withdraw your question, please press star then the number 2. Operator00:00:32Please note this event is being recorded. I would now like to Operator00:00:36hand the I would now like Operator00:00:37to turn the call over to Mr. Najeeb Mostemad, Vice President, Investor Relations for PRA Group. Please go ahead. Najim MostamandVice President and Investor Relations at PRA Group00:00:48Thank you. Good evening, everyone, and thank you for joining us. With me today are Avik Gital, President and Chief Executive Officer Martin Scholand, President of PRA Group Europe 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. Najim MostamandVice President and Investor Relations at PRA Group00:01:20We 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. 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 Q1 twenty twenty five and Q1 twenty twenty four unless otherwise noted, and our Americas results include Australia. Najim MostamandVice President and Investor Relations at PRA Group00:02:17During our call, we will discuss debt to adjusted EBITDA for the twelve months ended 03/31/2025, as well as return on average tangible equity. Please refer to the appendix of the slide presentation used during this call for a reconciliation of the most directly comparable U. S. GAAP financial measures to non GAAP financial measures. And with that, I'd now like to turn the call over to Vic. Vikram AtalPresident and CEO at PRA Group00:02:45Thank you, Najim, and thank you, everyone, for joining us this evening. I'm excited to have our incoming President and CEO, Martin Schulen, joining us for today's call. Before I introduce Martin, let me first recap our overall performance for the quarter and progress against our strategic pillars. Building on a successful 2024, we started the year with momentum and delivered another quarter of strong results. This was highlighted by a 19% growth in portfolio purchases, record ERC, our fourth consecutive quarter of double digit cash collections growth, and a nearly 300 basis point improvement in cash efficiency. Vikram AtalPresident and CEO at PRA Group00:03:32While net income was lower compared to prior quarters, given the moderated level of changes in expected recoveries, we still were able to maintain profitability, and perhaps more importantly, deliver 13% growth in trailing twelve months adjusted EBITDA. And this represents the seventh consecutive quarter of adjusted EBITDA growth. We continue to make progress across each of our three strategic pillars during the quarter. As it relates to the first pillar, optimizing investments, we deployed capital globally to capitalize on appropriate market opportunities and returns. This contributed to attractive pricing across our markets and higher investment levels in Europe this quarter, leading to a record total ERC. Vikram AtalPresident and CEO at PRA Group00:04:27Moving on to the second pillar, operational execution. Within our U. S. Legal collections channel, we remain focused on reducing cycle times and optimizing our post judgment activities. These actions, along with the increased level of recent portfolio purchases, have led to a notable uptick in US legal cash collections over the past several quarters, increasing 33% year over year in Q1 to $111,000,000 As a reminder, we do not begin our collections activity within the legal collection channel, but consider using it if and when our customers do not engage with us voluntarily. Vikram AtalPresident and CEO at PRA Group00:05:12In our US non dealer operations, we have enhanced our customer reach and engagement, implemented new dial up strategies, improved offer strategies to accommodate customer needs, and continue to gain traction in our digital efforts, as we experience a significant increase in customer interactions through this channel. And lastly, our third pillar, managing expenses. Earlier this month, we completed the consolidation of three of our US call centers, following the successful implementation of work from home protocols for our eligible US Collectors, which has contributed to lower than expected attrition in our U. S. Collector base. Vikram AtalPresident and CEO at PRA Group00:05:58Since our experience suggests that tenured collectors typically perform better than less tenured collectors, this moderation in attrition has led us to grow our offshore headcount at a more measured pace this year. As we move forward, we will continue to balance the flexibility and cost advantages of our offshore collectors with the tenure and performance of our US Collectors. As we reflect on the past two years, I am highly encouraged by all that we have accomplished as a company, leveraging our three pillar strategy. We enhanced our senior leadership team, continued to grow our European business, purchased record amounts of portfolios globally at attractive pricing, improved our US call center strategies, revitalized The US legal collection channel, launched and expanded offshoring, and strengthened our capital structure. All of this has translated into delivering accelerated growth in adjusted EBITDA of 13% in the trailing twelve months from a modest 3% in the comparable prior period. Vikram AtalPresident and CEO at PRA Group00:07:08Overall, I believe the work we have been doing has transformed the business and laid the foundation for Martin and the team to build on the recent progress and drive continued success. I'd now like to take a moment to introduce Martin and highlight how instrumental he has been in building our European business into one of the most efficient debt buying operations in the region today. I am truly excited for him to take the reins and lead the company into its next phase of growth. Martin has been with the company for thirteen years, following a highly successful strategy and consulting career at McKinsey. He currently serves not only as a president of our European business, but also as a valued member of the senior leadership team and the global investment committee, which oversees all major portfolio investments, both in The U. Vikram AtalPresident and CEO at PRA Group00:08:05S. And internationally. In addition to helping transform our European business, he has been a key partner to me across multiple areas of our US business, including investment oversight and IT modernization. These efforts, coupled with his leadership role across 15 of the 18 markets we operate in, has provided Martin with a strong global perspective. Prior to his current role, Martin was a Chief Operating Officer for Europe, where he developed a highly successful operations playbook that is fully aligned with our global three pillar strategy. Vikram AtalPresident and CEO at PRA Group00:08:43He has already hit the ground running, working very closely with me and our co founder and executive chairman, Steve Fredriksen, to ensure a seamless transition and to sustain momentum in the continued transformation of The US business. I'll now turn it over to Martin to share some of his perspectives and insights from leading the European business and how they will apply to his new role leading PRA globally. Martin SjolundPresident - PRA Group Europe at PRA Group00:09:10Thank you, Vic. It is a pleasure to connect with everyone today, many of whom I've already met over the years at prior conferences, road shows, and meetings. I just wanna start by thanking Vic for all that he has done for PRA over the past decade. First as a board member and more recently as president and CEO. He has done a tremendous job stabilizing The US business, assembling a seasoned leadership team and returning the company to profitability. Martin SjolundPresident - PRA Group Europe at PRA Group00:09:37I believe we're operating in a truly exciting time for PRA underpinned by the numerous competitive strengths and opportunities in our business, including a strong leadership team with decades of industry experience and an opportunity to leverage global talent and scale, deep seller and lender relationships with the robust supply outlook in The U. S. And a more rational competitive dynamic in Europe compared to a few years ago. A diversified global footprint of customers, cash generation and ERC across 18 markets. And finally, an opportunity to continue the operational transformation in The U. Martin SjolundPresident - PRA Group Europe at PRA Group00:10:15S. Throughout my time leading our European business, we have developed and shared important lessons and learnings and processes executing across the same themes as a three pillar strategy that has been helping transform The U. S. Business. I'm eager to continue the process of leveraging these best practices across our global business. Martin SjolundPresident - PRA Group Europe at PRA Group00:10:37As it relates to optimizing investments, we have developed a very strong track record in Europe of disciplined investments over the years. A great example is the twenty sixteen to twenty nineteen time period. We were very judicious in how we invested avoiding aggressive M and A and the purchase of portfolios at subpar returns. Our diversification across multiple markets has served us well. When the environment was irrational, we pulled back in certain markets. Martin SjolundPresident - PRA Group Europe at PRA Group00:11:06Our patients, discipline and long term approach has enabled us to take advantage of attractive opportunities as they presented themselves. This has resulted in our European business successfully investing more than $3,000,000,000 in portfolios in the last seven years with attractive returns while growing ERC at a compounded annual growth rate of 6%. With respect to operational execution, our strategy has been to use technology and standardized processes to create scale across multiple markets. For example, we moved the entire European infrastructure onto a common cloud platform several years ago. We also ramped up our digital capabilities and implemented a pan European cloud based contact platform that has created cost efficiencies and the sharing of best practices. Martin SjolundPresident - PRA Group Europe at PRA Group00:11:54We continue to test and implement other technology enhancements and to further improve our operations. Not to mention, we have developed our data and analytics capability by building talent hubs and attracting highly capable individuals, which has helped us leverage dynamic scoring strategies that optimize the cash collected in our portfolios. And finally, as it relates to managing expenses, I've always had an intense focus on cost management and we've been able to leverage technology and rigorous processes to create one of the most cost efficient platforms in Europe. Martin SjolundPresident - PRA Group Europe at PRA Group00:12:25These are just some of Martin SjolundPresident - PRA Group Europe at PRA Group00:12:26the many processes and perspectives that we will be executing to drive our strategy across the company. I'm really excited about the opportunities that lie ahead. And with that, I'll turn it over to Rakesh for a summary of our Q1 financial results. Rakesh SehgalExecutive VP & CFO at PRA Group00:12:40Thanks, Martin. We purchased $292,000,000 of portfolios during the quarter, of which $178,000,000 were in The Americas and $113,000,000 were in Europe. In The US, we purchased $161,000,000 of portfolios. Our 2025 Americas core purchase price multiple finished the quarter at 2.18 times, which is higher than in the recent past, reflecting the mix of portfolios purchased in the quarter. Keep in mind that purchase price multiples are the cash we expect to collect for dollar invested and are influenced in part by the types of portfolios we buy and the markets in which we buy them. Rakesh SehgalExecutive VP & CFO at PRA Group00:13:31In Europe, portfolio purchases were $113,000,000 with investments across most of our markets. As a result of the strong buying, we grew ERC to a record $7,800,000,000 at the end of the quarter. This is up 20% year over year and up 5% on a sequential basis. We expect to collect approximately $1,800,000,000 of our current ERC balance during the next twelve months. Based on the average purchase price multiples recorded so far in 2025, we would need to invest approximately $920,000,000 globally over the next twelve months to replace this runoff and maintain current ERC levels. Rakesh SehgalExecutive VP & CFO at PRA Group00:14:26Looking to the rest 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 $497,000,000 up 11% from the prior year period, with U. S. Core cash collections up 20%. The increase in global cash collections was driven by both higher levels of recent portfolio purchases and the positive impact of our cash generating initiatives. Rakesh SehgalExecutive VP & CFO at PRA Group00:15:05Similar to previous quarters, roughly half of our total collections in Q1 came from outside The U. S. Within The US, nearly half of the collections came from the legal collections channel, which has a much longer collection timeframe versus other channels. Let's turn now to total portfolio revenue, which was $269,000,000 for the quarter, with portfolio income of $241,000,000 and changes in expected recoveries of $28,000,000 Portfolio income was up 19% for the quarter, reflecting an increased level of portfolio investments and improved returns in recent quarters. Of the $28,000,000 in changes in expected recoveries, dollars 17,000,000 was due to cash over performance, while the remaining $11,000,000 reflects the net present value of changes in our ERC, which reflects increases in our expectations for future cash collections. Rakesh SehgalExecutive VP & CFO at PRA Group00:16:19On a consolidated basis, our overall business over performed by 2% with Europe exceeding expectations by 10%. U. S. Core cash collections were up a strong 20% year over year, representing the fifth consecutive quarter of double digit growth, but were 4% below our expectations. Historically, our first quarter cash collections in The US have experienced seasonality increases, typically driven by consumer tax refunds that didn't materialize this quarter to the extent that we modeled. Rakesh SehgalExecutive VP & CFO at PRA Group00:17:00Our curves are realigned each quarter and reflect our best estimate for future cash collections. Given the current macroeconomic environment in The U. S, we have continued to be judicious with respect to ERC increases. Notwithstanding the uncertainty in the external environment, our customers remain engaged as reflected in the level of payment plans being established and the associated cash collections in our business. To the extent any macro driven consumer stress becomes evident within our business, we believe the continued positive impact from our strategic initiatives should be able to provide a meaningful offset. Rakesh SehgalExecutive VP & CFO at PRA Group00:17:50Total revenues were $270,000,000 for the quarter, up 5% year over year. Operating expenses were $195,000,000 up 3% from the prior year period. Legal collection costs were up $7,000,000 driven primarily by investments in our U. S. Legal collections channel, which is expected to continue driving growth in future cash collections. Rakesh SehgalExecutive VP & CFO at PRA Group00:18:23Our cash efficiency ratio was 61%, up from 58% in the prior year period. This increase is even after absorbing the additional $7,000,000 of legal collection costs. Net interest expense was $61,000,000 an increase of $9,000,000 primarily reflecting higher debt balances due to increased portfolio investments. Our effective tax rate was 32% for the quarter. For the full year 2025, we expect our effective tax rate to be in the mid-20s, depending on income mix from various countries and other factors. Rakesh SehgalExecutive VP & CFO at PRA Group00:19:13Net income attributable to PRA was $4,000,000 or $09 in diluted earnings per share. This was lower than in recent quarters, largely due to the moderated level of changes in expected recoveries mentioned earlier. This is a cash driven business and our adjusted EBITDA growth has accelerated over the past twelve months, enabling us to capitalize on strong portfolio supply while maintaining stable leverage. Our debt to adjusted EBITDA ratio was 2.93 times as of March 31, which is within our long term target of two to three times and well below our debt covenant limits. The leverage ratio would be expected to trend to the higher end of our target range during periods of rising portfolio purchases. Rakesh SehgalExecutive VP & CFO at PRA Group00:20:14In terms of our funding capacity, we had $3,100,000,000 in total committed capital under our credit facilities as of March 31. We had total availability of $919,000,000 comprised of $538,000,000 available based on current ERC and $381,000,000 of additional availability that we can draw from subject to borrowing base and debt covenants, including advance rates. We have no debt maturities until November 2027 when our European facility matures. 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 to further capitalize on the strong portfolio supply environment. We believe we have one of the most globally diversified debt purchase businesses in the world. Rakesh SehgalExecutive VP & CFO at PRA Group00:21:21We have built our capabilities carefully over the past twenty five years, seeking out specific markets, partners, and platforms that allow us to profitably deploy capital judiciously and opportunistically. As an example, after more than ten years of building and investing in Brazil, last month we completed the sale of our equity interest in RCB, the servicing company for our investments in that market. This sale will generate an estimated after tax gain of approximately $28,000,000 considering the foreign exchange rate in April. Importantly, the ownership structure of our Brazilian investment entities remains intact and we will continue making portfolio investments there through our ongoing relationship with RCB and our longtime local investing partners. Overall, the first quarter represented a positive start to the year with encouraging results in key financial metrics, including portfolio investment levels and pricing, cash collections, adjusted EBITDA, and cash efficiency ratio. Rakesh SehgalExecutive VP & CFO at PRA Group00:22:41At this time, we're not changing our previously provided financial targets, except for the return on average tangible equity, which is likely to be at a lower level than our target of approximately 12%. As we move through the coming quarters, we will affirm, raise or lower these targets as appropriate. In closing, we are excited to enter this new chapter in PRA's nearly three decade history and believe we are well positioned to execute on our strategy to drive continued growth, profitability, and shareholder value. Thank you as always for your continued support. And with that, we are now ready for questions. Operator00:23:31Thank 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 touch tone phone. Your line is now open. David ScharfAnalyst at Citizens JMP Securities, LLC00:24:01Hi. Good afternoon. Thanks for taking my questions, and welcome aboard, Martin. So listen, first question's really I think what's been on a lot of people's minds during this reporting season you know, thus far, which is obviously just the state of the the consumer. And, you know, I'm I'm wondering, you know, we we have not heard from too many consumer lenders thus far that that they saw a tax refund season being notably maybe lower than than than prior years, maybe modestly. David ScharfAnalyst at Citizens JMP Securities, LLC00:24:47But as you reflect on sort of the seasonal modeling you referred to, which I assume refers to tax refund season in The US, do you I mean, at this point and and based on kinda also what you're seeing in April and into May, did you feel like the variance relative to your modeling is entirely refund driven? Or are there other behavioral patterns you're seeing in consumer payments lately that suggests maybe some weakening of the consumer? Vikram AtalPresident and CEO at PRA Group00:25:27Great question, David, and very pertinent relative to our results and the commentary we made. This is Vic. I'll take that, and Rakesh can supplement as applicable. Look, from an external perspective in terms of the level of tax refunds that were provided by Treasury, they were, I think, relative to prior years would be regarded as fairly normal, right, and nothing unusual in volume of refunds that were given. Internally, with regard to our interactions with consumers, as we mentioned in our remarks, we are seeing a positive level of engagement with consumers. Vikram AtalPresident and CEO at PRA Group00:26:14They are maintaining their establishing plans and maintaining their plans. And so we're not seeing, at this point in time and a little bit through the first few weeks of the second quarter, Nothing at this point in time that would suggest a fall off in consumer activity with us. That said, clearly we had a mismatch between our expectations for cash collection in the quarter and the actual cash that came in, albeit it was a very strong quarter with regard to the quarter on quarter increase as well as the year on year increase in cash, clearly we had a disconnect with regard to the expectations in our business. And that just flowed through, right? So we don't see this linked as a consumer driven issue in our business or externally at this point in time. Vikram AtalPresident and CEO at PRA Group00:27:13It really was around the modeling that we had for the seasonality, which was, I guess in retrospect, higher than the actual trends. Rakesh, I think we've taken a view the causality of this and the implications. Maybe you could just add to that, right? Rakesh SehgalExecutive VP & CFO at PRA Group00:27:32Yes, David, good question. Look, Vic said, from a cash perspective, we had a very strong quarter. You look at the key metrics, whether it's cash collections growth, cash EBITDA and cash efficiency. We talked about the 11% growth in cash collections on the call, but even quarter over quarter, your cash EBITDA grew 17% and then cash efficiency was up 300 basis points. And this is after 7,000,000 of higher legal spend. Rakesh SehgalExecutive VP & CFO at PRA Group00:28:04So look, it goes back to as Vic said, where we had modeled. And so on The US side, the core cash collections were up 20%, which was very strong. And this is on top of 22% growth that we had in all of '24 versus '23. Now, however, our US core cash collections had a 4% shortfall relative to the accounting CECL expectations. In other words, the 4% cash on performance that we saw this quarter. Rakesh SehgalExecutive VP & CFO at PRA Group00:28:38And it really wasn't an anomaly this quarter after seven straight quarters of positive cash over performance. As you know, like US accounts about 50 of the cash. So at 4% on the performance, it equates to roughly about 10,000,000 shortfall versus the CECL expectations. And what really happened is that the Q1 cash collections, they did exceed the Q4 cash collections in terms of the growth rates. We've always seen that uptick, but it did not exceed to the same magnitude as was reflected in our models. Rakesh SehgalExecutive VP & CFO at PRA Group00:29:19And so we really believe that this shortfall is timing. If you look at our press release with respect to the purchase price multiples for the Americas vintages, you'll see that they're essentially unchanged as we believe we can collect the full amount of the total estimated collections. As Vic said, and I want to reiterate our customers both in Europe and in The US remain engaged and we continue to see payment plans being established. David ScharfAnalyst at Citizens JMP Securities, LLC00:29:52Got it. Understood. No, I appreciate all that color. More of a technical question coming out of that, Rakesh. I know it wasn't explicitly quantified, but the reduction in the earnings guidance this year from 12% to something below that, does that represent just the flow through of the first quarter coming in lower than expected? David ScharfAnalyst at Citizens JMP Securities, LLC00:30:27Or are you making in or is inherent in that assumptions about further in the year? Vikram AtalPresident and CEO at PRA Group00:30:39Not an explicit assumption, David, I'll take that. I think, look, obviously the first quarter came in light relative to what we would have modeled, right? We've stated that pretty clearly. As we look out at the rest of the year, just given the macroeconomic environment that we see today and the relative degree of uncertainty vis a vis what would have been expected three, four months ago, we just said it was appropriate to signal that the level of cash generation that might be expected through the next nine months, the ability to influence the net present value or future value of initiatives that we've got, we just need to be cautious with regard to that, right? And so we felt that we were reasonably comfortable restating our views with regard to the other vectors that we had pointed out a few months ago. Vikram AtalPresident and CEO at PRA Group00:31:40But certainly on the return calculation, felt that we should signal the appropriate level of commentary on that, right, rather than be reaffirming at that level. And the rest of the year will demonstrate how the world sort Vikram AtalPresident and CEO at PRA Group00:31:59of turns out and how our business operates. Rakesh SehgalExecutive VP & CFO at PRA Group00:32:02And David, if I could add to that, look, buying remains strong. As you saw the numbers that I mentioned, Europe had a strong quarter. So buying continues to be at elevated levels. And we also had a very strong 2024. Rakesh SehgalExecutive VP & CFO at PRA Group00:32:19We bought 1,400,000,000.0 globally with 800,000,000 in The U. S. So if you think about the revenue, the two components portfolio income, as well as the change in expected recoveries, we had a 19% growth this quarter in portfolio income. And this is on top of a 13% growth. So we expect that line to continue to grow as the purchases that were made at significantly higher multiples than say in 2023, as that flows through our P and L. Rakesh SehgalExecutive VP & CFO at PRA Group00:32:55And as Vic said, we are taking a more judicious, cautious, prudent approach with respect to any changes in net present value of ERC increases, just given the current macro environment. David ScharfAnalyst at Citizens JMP Securities, LLC00:33:11Understood. Great. I'll get back in queue. Thanks very much. Operator00:33:16Thank you. Your next question comes from the line of Mark Hughes from Truist. Your line is now open. Mark HughesAnalyst at Truist Securities00:33:24Yeah. Thank you. Good afternoon. Welcome, Martin. The efficiency ratio was quite good in the quarter. Mark HughesAnalyst at Truist Securities00:33:33I think your guidance, which I assume is is still relevant, percent plus, but you did better than that. Was there anything unusual in terms of the expenses this quarter? Any one timers that helped? Or is this just the result of the initiatives you've undertaken? Vikram AtalPresident and CEO at PRA Group00:33:58No, no one timers that artificially inflated that ratio. In fact, as Rakesh mentioned, we absorbed a little bit higher legal costs. I think it was 7,000,000, Rakesh, Yeah, maybe higher. So that would be about probably 100 basis points plus, right, in terms of normalizing that. So nothing unusual, Mark, and I think we signaled at the beginning of the year that we'd be 60% plus. Vikram AtalPresident and CEO at PRA Group00:34:24And just given the way we're operating the business, the efficiencies we continue to identify, the work that's going on globally in the business, we felt comfortable suggesting that we were still comfortable with that 60% plus ratio. Rakesh SehgalExecutive VP & CFO at PRA Group00:34:43Yeah. And Mark, if you go down some of the lines, you'll actually see some improvement in some of those cost line items. As we've spent a lot of time talking about initiatives on the cash side, but we've also been very clear that our focus has been on having a marginal cost of running the business that's lower than the growth of cash. And so you'll see that even though our total expenses are up, that's really to drive the growth in the business. But some of those line items have actually started to reduce now as the initiatives get implemented. Mark HughesAnalyst at Truist Securities00:35:23Yeah, yeah. I was just looking at compensation costs. In The US, the purchases were down a little bit year over year. The multiples were up. Why didn't you buy a little bit more in The US under the circumstances? Vikram AtalPresident and CEO at PRA Group00:35:42It really is a good signal, Mark, about how we run a global investment franchise, right? And I'll let Martin speak to some of the activity that he's seen in Europe over the last few months, Martin, and what we're seeing from a supply dynamic there, right? Martin SjolundPresident - PRA Group Europe at PRA Group00:36:01Yeah, no, we had good quarter for buying in Europe. Overall, the market is fairly stable, I would say, in Europe. But we've seen, I think the competitive intensity has normalized to a level that we're more comfortable with compared to where it was a couple of years ago. So overall, I Martin SjolundPresident - PRA Group Europe at PRA Group00:36:20think we're off to a good start for this year. Vikram AtalPresident and CEO at PRA Group00:36:22Yeah. And I think, look, I think we take a view on ensuring that we are optimizing our level of investment globally, depending on where we're seeing the supply emanate from. And that's just the way it turned out this quarter. So we really do run a global investment view on the stigma. Vikram AtalPresident and CEO at PRA Group00:36:43And so quarter to quarter, we'll likely see movements across that, but nothing unusual. Mark HughesAnalyst at Truist Securities00:36:51Yeah. Is US supply still increasing, or is it stabilized? Rakesh SehgalExecutive VP & CFO at PRA Group00:36:57I think we've just had actually, in fact, we had Vikram AtalPresident and CEO at PRA Group00:37:00conversations in the last week, right? Our head of investments, Owen, was meeting with a number of our senior seller counterparts. And the signals coming back to us is that they're not increasing, but they're going to remain at an elevated rate for a period of time. That's what we're hearing from them, right? So we'll see how that shakes out. Vikram AtalPresident and CEO at PRA Group00:37:27But it remains elevated. And you're as close to the overall market as we are, right? But balances keep growing and charge off rates remain high, right? So I think supply should remain persistent and elevated for the near term, for sure. Mark HughesAnalyst at Truist Securities00:37:49Thank you very much. Operator00:37:53Your next question comes from the line of Robert Dodd from Raymond James. Your line is now open. Heli ShethEquity Research Associate at Raymond James00:38:06Hi, everyone. This is Haley on for Robert. Thanks for the question. I know you mentioned earlier that consumers are continuing to remain engaged, and the cash collection flow through this quarter was primarily driven by seasonality. Are you seeing any other emerging trends or macro changes outside of seasonality and consumer behavior that could have contributed? Vikram AtalPresident and CEO at PRA Group00:38:33Not at all. I think we obviously, as a consumer driven business, both here and in Europe, We try to have a reasonable beat on the level of interaction with consumers on a daily basis, right, to see the plans that are being established, the level to which they are being maintained and come through, the average payment size that is being established in the plans. Martin, maybe you could speak to what you're seeing in Europe, right? Martin SjolundPresident - PRA Group Europe at PRA Group00:39:05Yeah, we haven't seen any major shift in the European consumer behavior, at least among our customers. So twenty twenty five Q1 is off to a decent start there too. Cash came in a bit higher than we originally expected. So, at the moment, Martin SjolundPresident - PRA Group Europe at PRA Group00:39:18at least, it's consistent with what we expected. Heli ShethEquity Research Associate at Raymond James00:39:21Understood. Heli ShethEquity Research Associate at Raymond James00:39:24Thanks. And just a quick follow-up here. With the recent approval of the Capital One and Discover merger, considering Discover has historically never been a seller, can you speak to or quantify some of the long term impacts you expect to see on the business from that? Vikram AtalPresident and CEO at PRA Group00:39:41We don't discuss or cover and disclose who we buy from and the impact. Obviously, we are close to the market with regard to the M and A activity. And to the extent that M and A activity provides more supply into the system, that'll be sort of positive for us, right? But that will be a question already to be asked of the CAP-one and Discover, right, with regard to their perspectives on this whole marketplace. Heli ShethEquity Research Associate at Raymond James00:40:17Got it. Thanks for the color. Operator00:40:21Your next question comes from the line of Mark Hughes from Truist. Your line is now open. Mark HughesAnalyst at Truist Securities00:40:27Yeah, thank you. The legal collections costs, are they going to continue to be elevated or does that normalize at some point here? Rakesh SehgalExecutive VP & CFO at PRA Group00:40:38Yeah, Mark, I think, like we said, back in February, we do expect the legal collection costs to increase, but at a much lower level than what we saw in '24. So in '24, just to remind you that you had the number get to 125 versus 89,000,000 in '23. And so that was a 40% increase. We expect that number to be much lower than that increase. Look, we've been investing heavily in legal. Rakesh SehgalExecutive VP & CFO at PRA Group00:41:11That's not how we like to start. It depends on the ability of the customers to pay. And that's when we make decisions whether or not to put folks into the legal channel. So we think that we are investing in this business for future cash growth, but you should see those levels in legal spend start to moderate in 2025. And to some extent, Vikram AtalPresident and CEO at PRA Group00:41:37the legal spend that we're going to see this year will be a result of not we haven't made strategy changes with regard to putting more people into legal. It's really the amount we bought last year. There's a time lag between when we buy it and when it may be appropriate or qualifying for legal, And that will be coming through this year a little bit. So that's what's going be driving the increase year on year. But it's going be at a much more moderated pace mark, relative to what you saw as an increase in 'twenty four versus 'twenty three. Mark HughesAnalyst at Truist Securities00:42:13Understood. And then the noncontrolling interest, how should we model that? Or at least how should we think about it, the drivers there? Rakesh SehgalExecutive VP & CFO at PRA Group00:42:22Yeah, so Mark, this is the investment we have in Brazil. And so, as I've mentioned in the past, we've had a partnership there for ten years. It has done really well for us, both on the investment side and on the servicing side. We had an opportunity to exit the stake in the servicer that we partnered with. And that obviously resulted in a gain that will be recognized in Q2 that I mentioned on the call was 28,000,000 based on the FX in April on an after tax basis. Rakesh SehgalExecutive VP & CFO at PRA Group00:43:00And the other NCI is really the income from the investments that we're making there. And you should just assume that, let's say it's a fiftyfifty partnership. And so given the profitability there in the business coming out of those investments, 50% of the share comes to us, 50% of the share goes to the partner. And that's the NCI line item. Thank you. Operator00:43:46There are no further questions at this time. I will now turn the call over to Mr. Vic Atal. Please continue. Vikram AtalPresident and CEO at PRA Group00:43:53Thank you, everybody, for joining us today. Thank you for your support, and we look forward to meeting with you in a few months' time talking about our second quarter results. Appreciate it. Operator00:44:06Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.Read moreParticipantsExecutivesNajim MostamandVice President and Investor RelationsVikram AtalPresident and CEOMartin SjolundPresident - PRA Group EuropeRakesh SehgalExecutive VP & CFOAnalystsDavid ScharfAnalyst at Citizens JMP Securities, LLCMark HughesAnalyst at Truist SecuritiesHeli ShethEquity Research Associate at Raymond JamesPowered by Key Takeaways Strong Q1 results included 19% growth in portfolio purchases, a record ERC of $7.8 billion (up 20% YoY), and 11% cash collections growth, marking the fourth consecutive quarter of double-digit cash growth. Operational execution delivered a 300 basis point improvement in cash efficiency to 61%, aided by US legal channel enhancements (33% YoY legal cash growth) and US call center consolidation with work-from-home protocols reducing attrition. Capital deployment remained disciplined, with $292 million in Q1 portfolio investments (Americas $178 million, Europe $113 million) at a 2.18x purchase multiple in the Americas, and plans to invest ~$920 million over the next 12 months to maintain ERC levels. Leadership transition underway as Martin Schulen, who grew PRA Europe into a top debt buyer with $3 billion invested since 2016, will succeed Avik Gital as President and CEO to lead PRA’s next growth phase. Balance sheet and outlook remain strong: trailing-12 month adjusted EBITDA grew 13% (seventh consecutive quarter), net debt/EBITDA at 2.93x within the 2–3x target, $919 million in available liquidity, and existing guidance unchanged except a reduced return on tangible equity target due to Q1 modeling variances. AI Generated. May Contain Errors.Conference Call Audio Live Call not available Earnings Conference CallPRA Group Q1 202500:00 / 00:00Speed:1x1.25x1.5x2xTranscript SectionsPresentationParticipants Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) PRA Group Earnings HeadlinesEarnings call transcript: PRA Group misses Q1 2025 EPS forecast, stock dropsMay 7, 2025 | investing.comPRA Group Inc. Q1 Profit Misses EstimatesMay 7, 2025 | nasdaq.comBuffett’s favorite chart just hit 209% – here’s what that means for goldA Historic Gold Announcement Is About to Rock Wall Street For months, sharp-eyed analysts have watched the quiet buildup behind the scenes. Now, in just days, the floodgates are set to open. The greatest investor of all time is about to validate what Garrett Goggin has been saying for months: Gold is entering a once-in-a-generation mania. Front-running Buffett has never been more urgent — and four tiny miners could be your ticket to 100X gains.May 25, 2025 | Golden Portfolio (Ad)PRA Group, Inc. (NASDAQ:PRAA) Q1 2025 Earnings Call TranscriptMay 7, 2025 | msn.comPRA Group price target lowered to $23 from $30 at Citizens JMPMay 6, 2025 | msn.comPRA Group, Inc. (PRAA) Q1 2025 Earnings Call TranscriptMay 5, 2025 | seekingalpha.comSee More PRA Group Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like PRA Group? Sign up for Earnings360's daily newsletter to receive timely earnings updates on PRA Group and other key companies, straight to your email. Email Address About PRA GroupPRA Group (NASDAQ:PRAA), a financial and business services company, engages in the purchase, collection, and management of portfolios of nonperforming loans worldwide. It is involved in the purchase of accounts that are primarily the unpaid obligations of individuals owed to credit originators, which include banks and other types of consumer, retail, and auto finance companies. The company also acquires nonperforming loans, including Visa and MasterCard credit card accounts, private label and other credit card accounts, personal loans, automobile loans, and small business loans from banks, credit unions, consumer finance companies, retailers, utilities, automobile finance companies, and other credit originators. In addition, it provides fee-based services on class action claims recoveries. The company was formerly known as Portfolio Recovery Associates, Inc. and changed its name to PRA Group, Inc. in October 2014. 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PresentationSkip to Participants Operator00:00:00Good evening, and welcome to PRA Group's First Quarter twenty twenty five Conference Call. All participants will be in a listen only mode. After today's presentation, there will be opportunity to ask questions. To ask a question, you may press star then the number 1 on your touch tone phone. To withdraw your question, please press star then the number 2. Operator00:00:32Please note this event is being recorded. I would now like to Operator00:00:36hand the I would now like Operator00:00:37to turn the call over to Mr. Najeeb Mostemad, Vice President, Investor Relations for PRA Group. Please go ahead. Najim MostamandVice President and Investor Relations at PRA Group00:00:48Thank you. Good evening, everyone, and thank you for joining us. With me today are Avik Gital, President and Chief Executive Officer Martin Scholand, President of PRA Group Europe 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. Najim MostamandVice President and Investor Relations at PRA Group00:01:20We 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. 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 Q1 twenty twenty five and Q1 twenty twenty four unless otherwise noted, and our Americas results include Australia. Najim MostamandVice President and Investor Relations at PRA Group00:02:17During our call, we will discuss debt to adjusted EBITDA for the twelve months ended 03/31/2025, as well as return on average tangible equity. Please refer to the appendix of the slide presentation used during this call for a reconciliation of the most directly comparable U. S. GAAP financial measures to non GAAP financial measures. And with that, I'd now like to turn the call over to Vic. Vikram AtalPresident and CEO at PRA Group00:02:45Thank you, Najim, and thank you, everyone, for joining us this evening. I'm excited to have our incoming President and CEO, Martin Schulen, joining us for today's call. Before I introduce Martin, let me first recap our overall performance for the quarter and progress against our strategic pillars. Building on a successful 2024, we started the year with momentum and delivered another quarter of strong results. This was highlighted by a 19% growth in portfolio purchases, record ERC, our fourth consecutive quarter of double digit cash collections growth, and a nearly 300 basis point improvement in cash efficiency. Vikram AtalPresident and CEO at PRA Group00:03:32While net income was lower compared to prior quarters, given the moderated level of changes in expected recoveries, we still were able to maintain profitability, and perhaps more importantly, deliver 13% growth in trailing twelve months adjusted EBITDA. And this represents the seventh consecutive quarter of adjusted EBITDA growth. We continue to make progress across each of our three strategic pillars during the quarter. As it relates to the first pillar, optimizing investments, we deployed capital globally to capitalize on appropriate market opportunities and returns. This contributed to attractive pricing across our markets and higher investment levels in Europe this quarter, leading to a record total ERC. Vikram AtalPresident and CEO at PRA Group00:04:27Moving on to the second pillar, operational execution. Within our U. S. Legal collections channel, we remain focused on reducing cycle times and optimizing our post judgment activities. These actions, along with the increased level of recent portfolio purchases, have led to a notable uptick in US legal cash collections over the past several quarters, increasing 33% year over year in Q1 to $111,000,000 As a reminder, we do not begin our collections activity within the legal collection channel, but consider using it if and when our customers do not engage with us voluntarily. Vikram AtalPresident and CEO at PRA Group00:05:12In our US non dealer operations, we have enhanced our customer reach and engagement, implemented new dial up strategies, improved offer strategies to accommodate customer needs, and continue to gain traction in our digital efforts, as we experience a significant increase in customer interactions through this channel. And lastly, our third pillar, managing expenses. Earlier this month, we completed the consolidation of three of our US call centers, following the successful implementation of work from home protocols for our eligible US Collectors, which has contributed to lower than expected attrition in our U. S. Collector base. Vikram AtalPresident and CEO at PRA Group00:05:58Since our experience suggests that tenured collectors typically perform better than less tenured collectors, this moderation in attrition has led us to grow our offshore headcount at a more measured pace this year. As we move forward, we will continue to balance the flexibility and cost advantages of our offshore collectors with the tenure and performance of our US Collectors. As we reflect on the past two years, I am highly encouraged by all that we have accomplished as a company, leveraging our three pillar strategy. We enhanced our senior leadership team, continued to grow our European business, purchased record amounts of portfolios globally at attractive pricing, improved our US call center strategies, revitalized The US legal collection channel, launched and expanded offshoring, and strengthened our capital structure. All of this has translated into delivering accelerated growth in adjusted EBITDA of 13% in the trailing twelve months from a modest 3% in the comparable prior period. Vikram AtalPresident and CEO at PRA Group00:07:08Overall, I believe the work we have been doing has transformed the business and laid the foundation for Martin and the team to build on the recent progress and drive continued success. I'd now like to take a moment to introduce Martin and highlight how instrumental he has been in building our European business into one of the most efficient debt buying operations in the region today. I am truly excited for him to take the reins and lead the company into its next phase of growth. Martin has been with the company for thirteen years, following a highly successful strategy and consulting career at McKinsey. He currently serves not only as a president of our European business, but also as a valued member of the senior leadership team and the global investment committee, which oversees all major portfolio investments, both in The U. Vikram AtalPresident and CEO at PRA Group00:08:05S. And internationally. In addition to helping transform our European business, he has been a key partner to me across multiple areas of our US business, including investment oversight and IT modernization. These efforts, coupled with his leadership role across 15 of the 18 markets we operate in, has provided Martin with a strong global perspective. Prior to his current role, Martin was a Chief Operating Officer for Europe, where he developed a highly successful operations playbook that is fully aligned with our global three pillar strategy. Vikram AtalPresident and CEO at PRA Group00:08:43He has already hit the ground running, working very closely with me and our co founder and executive chairman, Steve Fredriksen, to ensure a seamless transition and to sustain momentum in the continued transformation of The US business. I'll now turn it over to Martin to share some of his perspectives and insights from leading the European business and how they will apply to his new role leading PRA globally. Martin SjolundPresident - PRA Group Europe at PRA Group00:09:10Thank you, Vic. It is a pleasure to connect with everyone today, many of whom I've already met over the years at prior conferences, road shows, and meetings. I just wanna start by thanking Vic for all that he has done for PRA over the past decade. First as a board member and more recently as president and CEO. He has done a tremendous job stabilizing The US business, assembling a seasoned leadership team and returning the company to profitability. Martin SjolundPresident - PRA Group Europe at PRA Group00:09:37I believe we're operating in a truly exciting time for PRA underpinned by the numerous competitive strengths and opportunities in our business, including a strong leadership team with decades of industry experience and an opportunity to leverage global talent and scale, deep seller and lender relationships with the robust supply outlook in The U. S. And a more rational competitive dynamic in Europe compared to a few years ago. A diversified global footprint of customers, cash generation and ERC across 18 markets. And finally, an opportunity to continue the operational transformation in The U. Martin SjolundPresident - PRA Group Europe at PRA Group00:10:15S. Throughout my time leading our European business, we have developed and shared important lessons and learnings and processes executing across the same themes as a three pillar strategy that has been helping transform The U. S. Business. I'm eager to continue the process of leveraging these best practices across our global business. Martin SjolundPresident - PRA Group Europe at PRA Group00:10:37As it relates to optimizing investments, we have developed a very strong track record in Europe of disciplined investments over the years. A great example is the twenty sixteen to twenty nineteen time period. We were very judicious in how we invested avoiding aggressive M and A and the purchase of portfolios at subpar returns. Our diversification across multiple markets has served us well. When the environment was irrational, we pulled back in certain markets. Martin SjolundPresident - PRA Group Europe at PRA Group00:11:06Our patients, discipline and long term approach has enabled us to take advantage of attractive opportunities as they presented themselves. This has resulted in our European business successfully investing more than $3,000,000,000 in portfolios in the last seven years with attractive returns while growing ERC at a compounded annual growth rate of 6%. With respect to operational execution, our strategy has been to use technology and standardized processes to create scale across multiple markets. For example, we moved the entire European infrastructure onto a common cloud platform several years ago. We also ramped up our digital capabilities and implemented a pan European cloud based contact platform that has created cost efficiencies and the sharing of best practices. Martin SjolundPresident - PRA Group Europe at PRA Group00:11:54We continue to test and implement other technology enhancements and to further improve our operations. Not to mention, we have developed our data and analytics capability by building talent hubs and attracting highly capable individuals, which has helped us leverage dynamic scoring strategies that optimize the cash collected in our portfolios. And finally, as it relates to managing expenses, I've always had an intense focus on cost management and we've been able to leverage technology and rigorous processes to create one of the most cost efficient platforms in Europe. Martin SjolundPresident - PRA Group Europe at PRA Group00:12:25These are just some of Martin SjolundPresident - PRA Group Europe at PRA Group00:12:26the many processes and perspectives that we will be executing to drive our strategy across the company. I'm really excited about the opportunities that lie ahead. And with that, I'll turn it over to Rakesh for a summary of our Q1 financial results. Rakesh SehgalExecutive VP & CFO at PRA Group00:12:40Thanks, Martin. We purchased $292,000,000 of portfolios during the quarter, of which $178,000,000 were in The Americas and $113,000,000 were in Europe. In The US, we purchased $161,000,000 of portfolios. Our 2025 Americas core purchase price multiple finished the quarter at 2.18 times, which is higher than in the recent past, reflecting the mix of portfolios purchased in the quarter. Keep in mind that purchase price multiples are the cash we expect to collect for dollar invested and are influenced in part by the types of portfolios we buy and the markets in which we buy them. Rakesh SehgalExecutive VP & CFO at PRA Group00:13:31In Europe, portfolio purchases were $113,000,000 with investments across most of our markets. As a result of the strong buying, we grew ERC to a record $7,800,000,000 at the end of the quarter. This is up 20% year over year and up 5% on a sequential basis. We expect to collect approximately $1,800,000,000 of our current ERC balance during the next twelve months. Based on the average purchase price multiples recorded so far in 2025, we would need to invest approximately $920,000,000 globally over the next twelve months to replace this runoff and maintain current ERC levels. Rakesh SehgalExecutive VP & CFO at PRA Group00:14:26Looking to the rest 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 $497,000,000 up 11% from the prior year period, with U. S. Core cash collections up 20%. The increase in global cash collections was driven by both higher levels of recent portfolio purchases and the positive impact of our cash generating initiatives. Rakesh SehgalExecutive VP & CFO at PRA Group00:15:05Similar to previous quarters, roughly half of our total collections in Q1 came from outside The U. S. Within The US, nearly half of the collections came from the legal collections channel, which has a much longer collection timeframe versus other channels. Let's turn now to total portfolio revenue, which was $269,000,000 for the quarter, with portfolio income of $241,000,000 and changes in expected recoveries of $28,000,000 Portfolio income was up 19% for the quarter, reflecting an increased level of portfolio investments and improved returns in recent quarters. Of the $28,000,000 in changes in expected recoveries, dollars 17,000,000 was due to cash over performance, while the remaining $11,000,000 reflects the net present value of changes in our ERC, which reflects increases in our expectations for future cash collections. Rakesh SehgalExecutive VP & CFO at PRA Group00:16:19On a consolidated basis, our overall business over performed by 2% with Europe exceeding expectations by 10%. U. S. Core cash collections were up a strong 20% year over year, representing the fifth consecutive quarter of double digit growth, but were 4% below our expectations. Historically, our first quarter cash collections in The US have experienced seasonality increases, typically driven by consumer tax refunds that didn't materialize this quarter to the extent that we modeled. Rakesh SehgalExecutive VP & CFO at PRA Group00:17:00Our curves are realigned each quarter and reflect our best estimate for future cash collections. Given the current macroeconomic environment in The U. S, we have continued to be judicious with respect to ERC increases. Notwithstanding the uncertainty in the external environment, our customers remain engaged as reflected in the level of payment plans being established and the associated cash collections in our business. To the extent any macro driven consumer stress becomes evident within our business, we believe the continued positive impact from our strategic initiatives should be able to provide a meaningful offset. Rakesh SehgalExecutive VP & CFO at PRA Group00:17:50Total revenues were $270,000,000 for the quarter, up 5% year over year. Operating expenses were $195,000,000 up 3% from the prior year period. Legal collection costs were up $7,000,000 driven primarily by investments in our U. S. Legal collections channel, which is expected to continue driving growth in future cash collections. Rakesh SehgalExecutive VP & CFO at PRA Group00:18:23Our cash efficiency ratio was 61%, up from 58% in the prior year period. This increase is even after absorbing the additional $7,000,000 of legal collection costs. Net interest expense was $61,000,000 an increase of $9,000,000 primarily reflecting higher debt balances due to increased portfolio investments. Our effective tax rate was 32% for the quarter. For the full year 2025, we expect our effective tax rate to be in the mid-20s, depending on income mix from various countries and other factors. Rakesh SehgalExecutive VP & CFO at PRA Group00:19:13Net income attributable to PRA was $4,000,000 or $09 in diluted earnings per share. This was lower than in recent quarters, largely due to the moderated level of changes in expected recoveries mentioned earlier. This is a cash driven business and our adjusted EBITDA growth has accelerated over the past twelve months, enabling us to capitalize on strong portfolio supply while maintaining stable leverage. Our debt to adjusted EBITDA ratio was 2.93 times as of March 31, which is within our long term target of two to three times and well below our debt covenant limits. The leverage ratio would be expected to trend to the higher end of our target range during periods of rising portfolio purchases. Rakesh SehgalExecutive VP & CFO at PRA Group00:20:14In terms of our funding capacity, we had $3,100,000,000 in total committed capital under our credit facilities as of March 31. We had total availability of $919,000,000 comprised of $538,000,000 available based on current ERC and $381,000,000 of additional availability that we can draw from subject to borrowing base and debt covenants, including advance rates. We have no debt maturities until November 2027 when our European facility matures. 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 to further capitalize on the strong portfolio supply environment. We believe we have one of the most globally diversified debt purchase businesses in the world. Rakesh SehgalExecutive VP & CFO at PRA Group00:21:21We have built our capabilities carefully over the past twenty five years, seeking out specific markets, partners, and platforms that allow us to profitably deploy capital judiciously and opportunistically. As an example, after more than ten years of building and investing in Brazil, last month we completed the sale of our equity interest in RCB, the servicing company for our investments in that market. This sale will generate an estimated after tax gain of approximately $28,000,000 considering the foreign exchange rate in April. Importantly, the ownership structure of our Brazilian investment entities remains intact and we will continue making portfolio investments there through our ongoing relationship with RCB and our longtime local investing partners. Overall, the first quarter represented a positive start to the year with encouraging results in key financial metrics, including portfolio investment levels and pricing, cash collections, adjusted EBITDA, and cash efficiency ratio. Rakesh SehgalExecutive VP & CFO at PRA Group00:22:41At this time, we're not changing our previously provided financial targets, except for the return on average tangible equity, which is likely to be at a lower level than our target of approximately 12%. As we move through the coming quarters, we will affirm, raise or lower these targets as appropriate. In closing, we are excited to enter this new chapter in PRA's nearly three decade history and believe we are well positioned to execute on our strategy to drive continued growth, profitability, and shareholder value. Thank you as always for your continued support. And with that, we are now ready for questions. Operator00:23:31Thank 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 touch tone phone. Your line is now open. David ScharfAnalyst at Citizens JMP Securities, LLC00:24:01Hi. Good afternoon. Thanks for taking my questions, and welcome aboard, Martin. So listen, first question's really I think what's been on a lot of people's minds during this reporting season you know, thus far, which is obviously just the state of the the consumer. And, you know, I'm I'm wondering, you know, we we have not heard from too many consumer lenders thus far that that they saw a tax refund season being notably maybe lower than than than prior years, maybe modestly. David ScharfAnalyst at Citizens JMP Securities, LLC00:24:47But as you reflect on sort of the seasonal modeling you referred to, which I assume refers to tax refund season in The US, do you I mean, at this point and and based on kinda also what you're seeing in April and into May, did you feel like the variance relative to your modeling is entirely refund driven? Or are there other behavioral patterns you're seeing in consumer payments lately that suggests maybe some weakening of the consumer? Vikram AtalPresident and CEO at PRA Group00:25:27Great question, David, and very pertinent relative to our results and the commentary we made. This is Vic. I'll take that, and Rakesh can supplement as applicable. Look, from an external perspective in terms of the level of tax refunds that were provided by Treasury, they were, I think, relative to prior years would be regarded as fairly normal, right, and nothing unusual in volume of refunds that were given. Internally, with regard to our interactions with consumers, as we mentioned in our remarks, we are seeing a positive level of engagement with consumers. Vikram AtalPresident and CEO at PRA Group00:26:14They are maintaining their establishing plans and maintaining their plans. And so we're not seeing, at this point in time and a little bit through the first few weeks of the second quarter, Nothing at this point in time that would suggest a fall off in consumer activity with us. That said, clearly we had a mismatch between our expectations for cash collection in the quarter and the actual cash that came in, albeit it was a very strong quarter with regard to the quarter on quarter increase as well as the year on year increase in cash, clearly we had a disconnect with regard to the expectations in our business. And that just flowed through, right? So we don't see this linked as a consumer driven issue in our business or externally at this point in time. Vikram AtalPresident and CEO at PRA Group00:27:13It really was around the modeling that we had for the seasonality, which was, I guess in retrospect, higher than the actual trends. Rakesh, I think we've taken a view the causality of this and the implications. Maybe you could just add to that, right? Rakesh SehgalExecutive VP & CFO at PRA Group00:27:32Yes, David, good question. Look, Vic said, from a cash perspective, we had a very strong quarter. You look at the key metrics, whether it's cash collections growth, cash EBITDA and cash efficiency. We talked about the 11% growth in cash collections on the call, but even quarter over quarter, your cash EBITDA grew 17% and then cash efficiency was up 300 basis points. And this is after 7,000,000 of higher legal spend. Rakesh SehgalExecutive VP & CFO at PRA Group00:28:04So look, it goes back to as Vic said, where we had modeled. And so on The US side, the core cash collections were up 20%, which was very strong. And this is on top of 22% growth that we had in all of '24 versus '23. Now, however, our US core cash collections had a 4% shortfall relative to the accounting CECL expectations. In other words, the 4% cash on performance that we saw this quarter. Rakesh SehgalExecutive VP & CFO at PRA Group00:28:38And it really wasn't an anomaly this quarter after seven straight quarters of positive cash over performance. As you know, like US accounts about 50 of the cash. So at 4% on the performance, it equates to roughly about 10,000,000 shortfall versus the CECL expectations. And what really happened is that the Q1 cash collections, they did exceed the Q4 cash collections in terms of the growth rates. We've always seen that uptick, but it did not exceed to the same magnitude as was reflected in our models. Rakesh SehgalExecutive VP & CFO at PRA Group00:29:19And so we really believe that this shortfall is timing. If you look at our press release with respect to the purchase price multiples for the Americas vintages, you'll see that they're essentially unchanged as we believe we can collect the full amount of the total estimated collections. As Vic said, and I want to reiterate our customers both in Europe and in The US remain engaged and we continue to see payment plans being established. David ScharfAnalyst at Citizens JMP Securities, LLC00:29:52Got it. Understood. No, I appreciate all that color. More of a technical question coming out of that, Rakesh. I know it wasn't explicitly quantified, but the reduction in the earnings guidance this year from 12% to something below that, does that represent just the flow through of the first quarter coming in lower than expected? David ScharfAnalyst at Citizens JMP Securities, LLC00:30:27Or are you making in or is inherent in that assumptions about further in the year? Vikram AtalPresident and CEO at PRA Group00:30:39Not an explicit assumption, David, I'll take that. I think, look, obviously the first quarter came in light relative to what we would have modeled, right? We've stated that pretty clearly. As we look out at the rest of the year, just given the macroeconomic environment that we see today and the relative degree of uncertainty vis a vis what would have been expected three, four months ago, we just said it was appropriate to signal that the level of cash generation that might be expected through the next nine months, the ability to influence the net present value or future value of initiatives that we've got, we just need to be cautious with regard to that, right? And so we felt that we were reasonably comfortable restating our views with regard to the other vectors that we had pointed out a few months ago. Vikram AtalPresident and CEO at PRA Group00:31:40But certainly on the return calculation, felt that we should signal the appropriate level of commentary on that, right, rather than be reaffirming at that level. And the rest of the year will demonstrate how the world sort Vikram AtalPresident and CEO at PRA Group00:31:59of turns out and how our business operates. Rakesh SehgalExecutive VP & CFO at PRA Group00:32:02And David, if I could add to that, look, buying remains strong. As you saw the numbers that I mentioned, Europe had a strong quarter. So buying continues to be at elevated levels. And we also had a very strong 2024. Rakesh SehgalExecutive VP & CFO at PRA Group00:32:19We bought 1,400,000,000.0 globally with 800,000,000 in The U. S. So if you think about the revenue, the two components portfolio income, as well as the change in expected recoveries, we had a 19% growth this quarter in portfolio income. And this is on top of a 13% growth. So we expect that line to continue to grow as the purchases that were made at significantly higher multiples than say in 2023, as that flows through our P and L. Rakesh SehgalExecutive VP & CFO at PRA Group00:32:55And as Vic said, we are taking a more judicious, cautious, prudent approach with respect to any changes in net present value of ERC increases, just given the current macro environment. David ScharfAnalyst at Citizens JMP Securities, LLC00:33:11Understood. Great. I'll get back in queue. Thanks very much. Operator00:33:16Thank you. Your next question comes from the line of Mark Hughes from Truist. Your line is now open. Mark HughesAnalyst at Truist Securities00:33:24Yeah. Thank you. Good afternoon. Welcome, Martin. The efficiency ratio was quite good in the quarter. Mark HughesAnalyst at Truist Securities00:33:33I think your guidance, which I assume is is still relevant, percent plus, but you did better than that. Was there anything unusual in terms of the expenses this quarter? Any one timers that helped? Or is this just the result of the initiatives you've undertaken? Vikram AtalPresident and CEO at PRA Group00:33:58No, no one timers that artificially inflated that ratio. In fact, as Rakesh mentioned, we absorbed a little bit higher legal costs. I think it was 7,000,000, Rakesh, Yeah, maybe higher. So that would be about probably 100 basis points plus, right, in terms of normalizing that. So nothing unusual, Mark, and I think we signaled at the beginning of the year that we'd be 60% plus. Vikram AtalPresident and CEO at PRA Group00:34:24And just given the way we're operating the business, the efficiencies we continue to identify, the work that's going on globally in the business, we felt comfortable suggesting that we were still comfortable with that 60% plus ratio. Rakesh SehgalExecutive VP & CFO at PRA Group00:34:43Yeah. And Mark, if you go down some of the lines, you'll actually see some improvement in some of those cost line items. As we've spent a lot of time talking about initiatives on the cash side, but we've also been very clear that our focus has been on having a marginal cost of running the business that's lower than the growth of cash. And so you'll see that even though our total expenses are up, that's really to drive the growth in the business. But some of those line items have actually started to reduce now as the initiatives get implemented. Mark HughesAnalyst at Truist Securities00:35:23Yeah, yeah. I was just looking at compensation costs. In The US, the purchases were down a little bit year over year. The multiples were up. Why didn't you buy a little bit more in The US under the circumstances? Vikram AtalPresident and CEO at PRA Group00:35:42It really is a good signal, Mark, about how we run a global investment franchise, right? And I'll let Martin speak to some of the activity that he's seen in Europe over the last few months, Martin, and what we're seeing from a supply dynamic there, right? Martin SjolundPresident - PRA Group Europe at PRA Group00:36:01Yeah, no, we had good quarter for buying in Europe. Overall, the market is fairly stable, I would say, in Europe. But we've seen, I think the competitive intensity has normalized to a level that we're more comfortable with compared to where it was a couple of years ago. So overall, I Martin SjolundPresident - PRA Group Europe at PRA Group00:36:20think we're off to a good start for this year. Vikram AtalPresident and CEO at PRA Group00:36:22Yeah. And I think, look, I think we take a view on ensuring that we are optimizing our level of investment globally, depending on where we're seeing the supply emanate from. And that's just the way it turned out this quarter. So we really do run a global investment view on the stigma. Vikram AtalPresident and CEO at PRA Group00:36:43And so quarter to quarter, we'll likely see movements across that, but nothing unusual. Mark HughesAnalyst at Truist Securities00:36:51Yeah. Is US supply still increasing, or is it stabilized? Rakesh SehgalExecutive VP & CFO at PRA Group00:36:57I think we've just had actually, in fact, we had Vikram AtalPresident and CEO at PRA Group00:37:00conversations in the last week, right? Our head of investments, Owen, was meeting with a number of our senior seller counterparts. And the signals coming back to us is that they're not increasing, but they're going to remain at an elevated rate for a period of time. That's what we're hearing from them, right? So we'll see how that shakes out. Vikram AtalPresident and CEO at PRA Group00:37:27But it remains elevated. And you're as close to the overall market as we are, right? But balances keep growing and charge off rates remain high, right? So I think supply should remain persistent and elevated for the near term, for sure. Mark HughesAnalyst at Truist Securities00:37:49Thank you very much. Operator00:37:53Your next question comes from the line of Robert Dodd from Raymond James. Your line is now open. Heli ShethEquity Research Associate at Raymond James00:38:06Hi, everyone. This is Haley on for Robert. Thanks for the question. I know you mentioned earlier that consumers are continuing to remain engaged, and the cash collection flow through this quarter was primarily driven by seasonality. Are you seeing any other emerging trends or macro changes outside of seasonality and consumer behavior that could have contributed? Vikram AtalPresident and CEO at PRA Group00:38:33Not at all. I think we obviously, as a consumer driven business, both here and in Europe, We try to have a reasonable beat on the level of interaction with consumers on a daily basis, right, to see the plans that are being established, the level to which they are being maintained and come through, the average payment size that is being established in the plans. Martin, maybe you could speak to what you're seeing in Europe, right? Martin SjolundPresident - PRA Group Europe at PRA Group00:39:05Yeah, we haven't seen any major shift in the European consumer behavior, at least among our customers. So twenty twenty five Q1 is off to a decent start there too. Cash came in a bit higher than we originally expected. So, at the moment, Martin SjolundPresident - PRA Group Europe at PRA Group00:39:18at least, it's consistent with what we expected. Heli ShethEquity Research Associate at Raymond James00:39:21Understood. Heli ShethEquity Research Associate at Raymond James00:39:24Thanks. And just a quick follow-up here. With the recent approval of the Capital One and Discover merger, considering Discover has historically never been a seller, can you speak to or quantify some of the long term impacts you expect to see on the business from that? Vikram AtalPresident and CEO at PRA Group00:39:41We don't discuss or cover and disclose who we buy from and the impact. Obviously, we are close to the market with regard to the M and A activity. And to the extent that M and A activity provides more supply into the system, that'll be sort of positive for us, right? But that will be a question already to be asked of the CAP-one and Discover, right, with regard to their perspectives on this whole marketplace. Heli ShethEquity Research Associate at Raymond James00:40:17Got it. Thanks for the color. Operator00:40:21Your next question comes from the line of Mark Hughes from Truist. Your line is now open. Mark HughesAnalyst at Truist Securities00:40:27Yeah, thank you. The legal collections costs, are they going to continue to be elevated or does that normalize at some point here? Rakesh SehgalExecutive VP & CFO at PRA Group00:40:38Yeah, Mark, I think, like we said, back in February, we do expect the legal collection costs to increase, but at a much lower level than what we saw in '24. So in '24, just to remind you that you had the number get to 125 versus 89,000,000 in '23. And so that was a 40% increase. We expect that number to be much lower than that increase. Look, we've been investing heavily in legal. Rakesh SehgalExecutive VP & CFO at PRA Group00:41:11That's not how we like to start. It depends on the ability of the customers to pay. And that's when we make decisions whether or not to put folks into the legal channel. So we think that we are investing in this business for future cash growth, but you should see those levels in legal spend start to moderate in 2025. And to some extent, Vikram AtalPresident and CEO at PRA Group00:41:37the legal spend that we're going to see this year will be a result of not we haven't made strategy changes with regard to putting more people into legal. It's really the amount we bought last year. There's a time lag between when we buy it and when it may be appropriate or qualifying for legal, And that will be coming through this year a little bit. So that's what's going be driving the increase year on year. But it's going be at a much more moderated pace mark, relative to what you saw as an increase in 'twenty four versus 'twenty three. Mark HughesAnalyst at Truist Securities00:42:13Understood. And then the noncontrolling interest, how should we model that? Or at least how should we think about it, the drivers there? Rakesh SehgalExecutive VP & CFO at PRA Group00:42:22Yeah, so Mark, this is the investment we have in Brazil. And so, as I've mentioned in the past, we've had a partnership there for ten years. It has done really well for us, both on the investment side and on the servicing side. We had an opportunity to exit the stake in the servicer that we partnered with. And that obviously resulted in a gain that will be recognized in Q2 that I mentioned on the call was 28,000,000 based on the FX in April on an after tax basis. Rakesh SehgalExecutive VP & CFO at PRA Group00:43:00And the other NCI is really the income from the investments that we're making there. And you should just assume that, let's say it's a fiftyfifty partnership. And so given the profitability there in the business coming out of those investments, 50% of the share comes to us, 50% of the share goes to the partner. And that's the NCI line item. Thank you. Operator00:43:46There are no further questions at this time. I will now turn the call over to Mr. Vic Atal. Please continue. Vikram AtalPresident and CEO at PRA Group00:43:53Thank you, everybody, for joining us today. Thank you for your support, and we look forward to meeting with you in a few months' time talking about our second quarter results. Appreciate it. Operator00:44:06Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.Read moreParticipantsExecutivesNajim MostamandVice President and Investor RelationsVikram AtalPresident and CEOMartin SjolundPresident - PRA Group EuropeRakesh SehgalExecutive VP & CFOAnalystsDavid ScharfAnalyst at Citizens JMP Securities, LLCMark HughesAnalyst at Truist SecuritiesHeli ShethEquity Research Associate at Raymond JamesPowered by