PRA (US:PRAA)2020-11-07 18:17Financial Data and Key Metrics Changes - Global cash collections reached a record $519 million, an increase of $66 million or 15% compared to the same quarter last year [17] - Total revenues for the quarter were $268 million, up $22 million or 9% year-over-year, primarily due to significant overperformance in collections [17] - Net income was $42 million, resulting in diluted earnings per share of $0.92 [19] - Operating expenses decreased to $179 million, a $2 million reduction from the previous year [19] - The debt to trailing 12-month adjusted EBITDA ratio improved to 1.9 times from over 2.5 times at the end of 2019 [25] Business Line Data and Key Metrics Changes - U.S. non-legal collections increased by 37%, contributing significantly to the overall cash collections growth [19] - Cash collections in the Americas (excluding the U.S.) grew by $6 million or 21%, led by Brazil [19] - Legal cash collections in the U.S. decreased by 6%, while insolvency collections in the Americas fell by 18% [20] - European cash collections grew by $18 million or 14%, driven by record portfolio purchases in 2019 [20] Market Data and Key Metrics Changes - Estimated remaining collections (ERC) at the end of the quarter were $6.3 billion, with 50% in the U.S. and 45% in Europe [23] - Portfolio purchases in the Americas totaled $178 million, with a slight decrease in volume due to lower charge-off rates and bankruptcy filings [10][13] - European portfolio purchases were $79 million, marking the third highest Q3 in the company's history [15] Company Strategy and Development Direction - The company aims to maintain a strong capital position with over $1 billion available for portfolio investment, preparing for anticipated higher purchasing volumes in 2021 [26] - Management believes that the current operational structure allows for flexibility and capacity to raise additional capital if needed [30] - The company is focused on fair treatment of consumers and is adapting to new regulations under the Fair Debt Collection Practices Act [6][8] Management's Comments on Operating Environment and Future Outlook - Management anticipates a significant increase in charge-off rates, which could lead to more portfolio sales from banks [27] - The company expects strong volumes in both the U.S. and Europe in 2021, driven by increased charge-offs and provisioning by banks [34] - Management remains cautious about the sustainability of current collection performance, treating it as acceleration rather than a permanent improvement [21][46] Other Important Information - The company completed its first unsecured notes offering in the U.S. for its sector, receiving strong ratings from Moody's and Fitch [23] - The company retired $288 million of convertible notes that matured in August and amended its North American credit facility [23] Q&A Session Summary Question: Insights on the resurgence of volumes in Europe - Management indicated that the increase in volumes was largely due to portfolios that were paused earlier in the year, with expectations for strong volumes in 2021 [34] Question: Qualitative feedback from sellers regarding charge-offs - Management noted that there is an expectation of significant charge-off increases, with sellers trying to time their sales accordingly [37] Question: Legal expenses and their future trajectory - Management explained that the current lower legal expenses are a result of increased voluntary payments, which may lead to fewer accounts entering the legal process [39] Question: Changes in collections trajectory through the quarter - Management observed expected seasonal degradation in contact rates but noted that overall performance was significantly higher than the previous year [43] Question: Dynamics between U.S. and Europe regarding charge-offs - Management expressed optimism about both markets, indicating that Europe may recognize charge-offs sooner than the U.S. due to structural differences [54]