PRA GROUP INC Q2 FY2025 earnings call

European Business - Martin highlighted the European business has a proven multiyear track record with themes including an experienced leadership team, disciplined underwriting, strong operational execution, and cost efficiency. Owen James recently succeeded him as President of PRA Group, Europe, leveraging his strengths. - The company sold its equity interest in RCB, the servicing platform for its Brazil investments, generating a $30 million after-tax gain while maintaining operations in Brazil. ### U.S. Business - Martin emphasized accelerating the transformation of the U.S. business, including reorganizing U.S. operations with a new U.S.-focused operational team led by Steve Macke, measured on a single P&L. - Implemented a return-to-office initiative for corporate and support staff and plans to set up an office in Charlotte to access specialist talent. - Performing a deep dive analysis on modernizing the U.S. IT platform, drawing on learnings from Europe's cloud-based contact platform deployment. - Focused on managing expenses, including a comprehensive review of overhead costs.

During the second quarter, PRA Group purchased $347 million of portfolios, with $199 million in the Americas and $147 million in Europe. ERC (Expected Recoverable Cash) grew to a record $8.3 billion at the end of Q2, up 22% year-over-year and 6% sequentially. Cash collections for the quarter were $536 million, up 13% from the prior year period. Total portfolio revenue was $284 million, up 1%, with portfolio income at $251 million, up 20%. Operating expenses were $203 million, up 4% from the prior year period.

Portfolio Supply - Expect portfolio supply to remain elevated in the U.S. and relatively stable in Europe in the second half of 2025. ### Cash Collections - Aim for cash collections growth in the high-single digits for the full year. ### Adjusted EBITDA - Expect continued acceleration of adjusted EBITDA growth, with growth of 20% in the second quarter versus 13% growth in cash collections. ### Stock Repurchase - Repurchased $10 million of stock in the second quarter, with plans to continue opportunistically deploying capital to shareholders.

Market Competition - Markets are competitive, with fewer new entrants overpaying for portfolios than in the past, but still competitive. ### Debt Covenants - Constraints under debt covenants limited share repurchases in the second quarter, though expected to ease somewhat moving forward.

Q: David Scharf asked about the U.S. supply, seller relationships, and new asset classes.

A: Martin Sjolund stated the U.S. buying environment is elevated, they have strong long-standing seller relationships in the core areas, and will start small in new asset classes to build data and operational capability.

Q: Mark Hughes inquired about collections overperformance and U.S. reorganization.

A: Martin Sjolund said European performance has been strong with operational initiatives bearing fruit, and in the U.S., the reorganization aims to create a more empowered operational team with a single P&L for accountability and faster decision-making.

Q: Robert Dodd asked about the purchase environment and cost-saving initiatives.

A: Martin Sjolund said they balance volumes and returns, setting a $1.2 billion purchase target to strike the right balance, and cost-saving initiatives will take time with no immediate impact on numbers, focusing on overhead cost review and operational efficiency improvements.