Release Date: February 26, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q: Can you shed light on the recent moves at Cabot, especially after last year's significant goodwill impairment? A: Ashish Masih, President and CEO, explained that the UK and European markets have been challenging. This year, they reduced Cabot's ERC and exited the Italian NPL market, leading to goodwill charges. The actions taken are expected to resolve persistent issues and position Cabot for future success.
Q: What is the breakdown of the remaining goodwill on the balance sheet between Midland and Cabot? A: Ashish Masih stated that approximately $350 million of the goodwill is attributed to Cabot, while $150 million is related to Midland Credit Management (MCM).
Q: How should we view cash efficiency and operating expenses for 2025? A: Ashish Masih noted that cash efficiency has improved, with the margin increasing from 51.8% in 2023 to over 54% in 2024. The company continues to deploy technology and develop an omnichannel collection approach, which has helped maintain flat headcount while collections grew by 20%.
Q: Can you provide details on the ERC reduction at Cabot? A: Ashish Masih explained that the total ERC reduction at Cabot in Q4 was about $453 million, primarily affecting older vintages. The revenue impact from changes in expected recovery was $129 million, with two-thirds related to the UK.
Q: How do you view the pricing and supply conditions in the US market? A: Ashish Masih stated that pricing is stable, and returns are strong. The US market saw record portfolio supply in 2024, and the company expects favorable conditions to continue in 2025, driven by high charge-off rates and strong consumer credit card delinquencies.
Q: How did you get comfortable with strong Cabot purchases in Q4 despite adjustments in Europe? A: Ashish Masih explained that the Q4 purchases were opportunistic and not expected to continue at that level in 2025. The write-downs and impairments were related to older vintages, while the Q4 purchases were based on thorough diligence and evaluation.
Q: What led to the decision to exit certain European markets like Italy? A: Ashish Masih clarified that they exited the Italian NPL market due to competitive intensity and trends in NPL ratios. In Spain, they exited secured NPLs but remain in unsecured and SME segments. The UK remains a key market due to its large banks and consistent purchasing opportunities.
Q: Can you comment on the legal collection costs in the US? A: Ashish Masih noted that legal collections are a tool used selectively, with a record low share of 36% in 2024. The company is focusing on call center and digital collections, which are growing and contributing to operating efficiency.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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