• Portfolio Purchases: Record $1.4 billion in 2024, up 22% year over year.
• Cash Collections: $1.9 billion for the year, representing 13% growth year over year.
• Net Income: $71 million for the full year, translating to $1.79 in diluted earnings per share.
• Return on Average Tangible Equity: 10% in 2024, improved from negative 11% in 2023.
• Revenue: $1.1 billion for the full year, up 39% year over year.
• Cash Efficiency Ratio: 59% for the year.
• Effective Tax Rate: 19% for the full year.
• ERC (Estimated Remaining Collections): $7.5 billion at year-end 2024, up 17% from 2023.
• Debt to Adjusted EIA Ratio: 2.92 times as of December 31, 2024.
• Portfolio Revenue: $1.1 billion for the full year, with $857 million in portfolio income.
• Legal Collection Costs: Increased by $36 million year over year.
• Net Interest Expense: $61 million for the quarter.
• Cash Collections Growth Target for 2025: High single-digit growth expected.

• Warning! GuruFocus has detected 9 Warning Signs with PRAA.

Release Date: February 19, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• PRA Group Inc (NASDAQ:PRAA) achieved record portfolio purchases of $1.4 billion in 2024, marking a 22% increase year over year.
• Cash collections grew by 13% year over year, reaching $1.9 billion, driven by recent purchases and operational initiatives.
• The company reported a return on average tangible equity of 10%, a significant improvement from negative 11% in 2023.
• PRA Group Inc (NASDAQ:PRAA) expanded its senior leadership team, enhancing its operational capabilities.
• The company successfully increased its offshore collector base, which now accounts for over 30% of its US business, contributing to cost savings and operational efficiency.

Negative Points

• Operating expenses increased by 13% year over year, primarily due to higher legal collection costs.
• Net interest expense rose by $10 million, reflecting higher debt balances from increased portfolio investments.
• The effective tax rate for the quarter was 32%, which is relatively high compared to the full year rate of 19%.
• The company's debt to adjusted EIA ratio increased slightly due to significant portfolio purchases, though it remains within target range.
• Legal collection investments create a near-term drag on earnings and cash efficiency due to the lag between upfront costs and cash collection.

Q & A Highlights

Q: Can you elaborate on the competitive environment in Europe and its impact on supply? A: Vikram Atal, President and CEO, explained that while there have been challenges faced by competitors in Europe, PRA Group has not observed a significant change in competition. The large volume of market supply in the fourth quarter was due to an unusually high amount of spot sales, and PRA Group was well-positioned to take advantage of this supply.

Q: What is the outlook for the cash efficiency ratio, considering the legal channel investments and offshoring initiatives? A: Vikram Atal noted that in the short term, improvements in cash efficiency are expected as offshoring and expense management become more efficient. In the longer term, technological advancements like digital migration and AI could further enhance efficiency, although these are not immediate factors.

Q: How is the regulatory landscape affecting the entry of new competitors in the US market? A: Vikram Atal stated that despite a potentially more forgiving regulatory environment, the complexity and rigor required to navigate the legal and regulatory landscape make it challenging for new competitors to enter the market. PRA Group's established relationships and compliance with seller expectations provide a competitive advantage.

Q: Can you discuss the pricing stability in the US and its impact on purchase multiples? A: Rakesh Sehgal, CFO, mentioned that purchase multiples have stabilized at around 2.1 times, reflecting a significant improvement from 2023. The company is focusing on cash-generating initiatives, which could potentially increase these multiples further.

Q: What are the productivity and cost implications of the international collector workforce? A: Vikram Atal highlighted that offshore collectors provide significant cost savings, approximately $30,000 per collector annually. Productivity is on track, with offshore collectors performing comparably to similarly tenured US collectors, and attrition rates are lower offshore.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.