Good evening and welcome to the PRA Group First Quarter 2022 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Ms. Lauren Partin, Senior Vice President of Finance and Investor Relations for PRA Group. Please go ahead.

Thank you. Good evening, everyone and thank you for joining us. With me today are Kevin Stevenson, President and Chief Executive Officer and Pete Graham, 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 expectation. We assume no obligation to revise or update these statements. We 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 expectation. Please refer to the earnings press release 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 be found on the Investors section of our website at www.pragroup.com. Additionally, a replay of this call will be available shortly after its conclusion and the information needed to listen is in the earnings press release. All comparisons mentioned today will be between Q1 2022 and Q1 2021 unless otherwise noted and our Americas results include Australia. During our call, we will discuss adjusted EBITDA and debt to adjusted EBITDA for the 12 months ended March 31st, 2022, and December 31, 2021. Please refer to today's earnings release and the appendix of the slide presentation on our website used during this call for a reconciliation of these non-GAAP financial measures to the most directly comparable US GAAP financial measures. I'd now like to turn the call over to Kevin Stevenson, our President and Chief Executive Officer.

Well, thank you, Lauren and thank you, everyone for joining us this evening. A couple of comments before we begin. Over the past few months, we've all watched the tragic situation in Ukraine. My thoughts are not only with the people of Ukraine, but also with our team members across Europe, especially our people in Poland. It's inspiring to hear the stories of our employees gathering supplies, volunteering at the border and even opening their own homes to refugees. These actions are not only resonating in Poland and across Europe, but also back here on this side of the Atlantic. Our employees are energized and rallying to support each other. On the COVID front, we're starting to see some of our support staff voluntarily return to office, while we continue to offer many of our employees the flexibility to work from home. I have to say it's nice to hold in-person meetings again and see people's faces around the office. However, I'm not going to assume that 2022 will start bringing some sort of normalcy back to our work lives, spiking cases in different parts of the world and ever-changing government guidance, we will be prepared for the trials this year has in store for us. On to Q1, we had a strong quarter, led by the performance of our European operations. Keep in mind that prior year comparisons will be difficult, given the combination of COVID lockdowns, restrictions around the world and government programs in the US, all of which put many consumers in a position of having excess liquidity during 2020 and 2021. In cash collections, our cash in Q1, our cash collections were $481 million, a decrease of $75 million. The US led this decline for a number of reasons, which were largely related to the government…

Thanks, Kevin. Given the record year we had last year, the prior year comparisons are tough, but we're performing in line with expectations. Total revenues were $241 million for the quarter. Total portfolio revenue was $237 million, with portfolio income of $208 million and changes in expected recoveries of $30 million. During the quarter, we collected $24 million in excess of our expected recoveries. We also wrote down one portfolio in Brazil, resulting in a $20 million NPV adjustment, changing our curve shape and reducing our estimated future collections. Because of the ownership structure of this portfolio were only impacted by part of the write-down. You will notice the non-controlling interest is in addition to net income this quarter, which reflects the portion of the write-down shared by our partners. The net impact of this write-down to us was approximately $10 million. It's important to note, Brazil has been a very profitable market for us. The observed underperformance is isolated to this individual portfolio and is not indicative of the performance of Brazil as a whole. In fact, since we began investing in Brazil in 2015, our portfolio investments have significantly overperformed their underwritten curves even when including this write-down. Operating expenses were $169 million, a $10 million decrease from the first quarter of 2021. This was driven primarily by decreases in legal collection costs and fees, as well as compensation and employee services. The effective tax rate for the first quarter was 12%, driven by some discrete items in the quarter. However, we still expect the full year tax rate to be in the low 20% range. Net income was $40 million, which generated $0.97 in diluted earnings per share for the quarter. Cash collections were $481 million compared to $556 million in the first quarter of 2021. Americas…

Great. Thank you, Pete. This was a strong quarter following two consecutive years of record-breaking performance. Looking back, in 2020, we achieved a record $2 billion in cash collections and record cash efficiency ratio of 64.5%. And then in 2021, we again achieved multiple new records, cash collections, revenue, efficiency ratio and net income. We're able to learn a lot and innovate, but not only over the last two years, but over the last 25 years as a leader in the non-performing loan industry. We'll remain focused on our strategic objectives to expand products and market share, improving efficiency and modernizing collections, to be a trusted brand and to foster a high-performing workforce. One of our analysts in the call last quarter asked me, what are you most excited about? Honestly, I'm excited because this is a great place to be, a debt buyer, with plenty of cash, strong balance sheet, tenured management and more than 25 years of operating experience. I'm excited about the much anticipated supply we believe is coming and while supply is not where we'd like it to be today, history teaches thus a simple lesson, more is coming. It's not an if but a win story. I'm excited about our investments in data analytics and technology, which provide significant competitive advantages. We have a strong foundation. We've navigated every challenge we've been faced with. Our increasingly efficient operations is prepared for the anticipated increase in supply and I just can't wait to see what our team is going to do with it. In the meantime, we'll continue to invest with discipline across our global footprint, maintain a strong balance sheet, pursue M&A as appropriate and opportunistically return capital to shareholders. We thank you for putting your trust in us. Operator, we're now ready for questions.

[Operator Instructions] And our first question will come from Mark Hughes of Truist. Please go ahead.

There you go. I was on mute, I'm sorry. You were very nonresponsive to my hello. So...

That's the most popular words in the last couple of years, right? You must be on mute.

Yeah, afternoon. In Europe, your collection momentum seems to be pretty good, 11% outperformance. I think you mentioned it's a more stable environment given the lack of income support last year. But is there something about the -- either your collections effort or the underlying consumer health that's helping to drive those European collections?

No, sorry, I was off me too. No, no, that about covers it. We really think about this and we talked a lot about acceleration versus betterment. And we've seen it globally, but more pronounced in the United States. I can think of maybe Pete, would you want to jump in here, but perhaps another component of that is some of the geographies we invested in Europe have just longer flatter tails on the curves, such as the Nordics, that would be another example. Pete, would you want to add anything on that?

I think also just the strong investment that we've put out over the last couple of years is adding to that sort of tailwind we've got around the European business.

I assume, Mark, you're looking at like your recency stuff, right? Or you're looking at tranche level data, Mark?

I have not -- I haven't dug into that. I'm really kind of going after your commentary about the overperformance.

Got it, got it.

Okay. Thank you for that. And then your appetite for repurchase, you make compelling case, you anticipate supply will emerge, but maybe later in 2020, what's your appetite for share repurchases in the meantime given that your leverage is pretty low at this point?

Yes, I think you kind of hit the nail on the head there. We're below our target leverage range still and we still have a good amount of authorization left at the end of the quarter.

So maybe you think any extra cash flow in the quarter might go to share repurchases, is that a reasonable way to place to start?

Yes, again, I think we've been pretty programmatic since we started on this journey and all the conditions are still there that were there when we started, which is kind of, I think an attractive point in terms of buyback for us. We think the stock is undervalued. We've got strong liquidity and our leverage has been trending below targeted range.

And then on the tax rate, you mentioned that it will be in the low 20s for the full-year. Is the low 20s here on out? Or is the tax rate going to be little bit higher? Is there going to be some sort of bounce back or elevated tax rate the next couple of quarters?

Well, will obviously be higher than that in order to blend to a low 20s tax rate. So beyond that, I can't really give you guidance on what each quarter will be. But for the full year, we think we'll still be in that low 20s range.

Our next question is from Bob Napoli of William Blair. Please go ahead. Q - Spencer James Hi. This is Spencer James on for Bob. Thank you for taking the question. I just want o ask on the -- in your philosophy around accounting for finance receivables, in light of some of the conservatism you built in 2020 and 2021 with regards to over collections. Any updated thoughts on the decisions you made the last couple of years in accounting for finance receivables?

No, I think we've been pretty consistent throughout time here in the sort of the early part of the pandemic when there was less certainty about what was going to happen in the future. We had some pretty large adjustments to the curve when we had overperformance. As I mentioned in my prepared remarks, over the last few quarters, we've been taking a look at the near-term curve and trying to sync that up with kind of our trending performance. And I think we've been successful in sort of getting closer to the pin as we move through time. This is an asset class that has a good deal of variability into it -- in it. So we're conscious of that as well as we're setting our curves. But I think from where I sit, we'll continue to employ that same philosophy as we move through time and we'll see how performance develops over time.

Okay. Thank you. And one follow-up. How is this tax season trending relative to more normalized seasonal trends given the stimulus were lapping and anything that might be unusual about this tax season?

Well, I think it is probably a more normalized tax season than what we've seen in the last couple of years, particularly in comparison to the prior with a big stimulus payment going out to folks in the quarter last year. That coupled with what we believe was acceleration in prior years, particularly on smaller balance accounts, you would have had people pay out when they had liquidity last year. So we had a little bit more muted uptick in the first quarter than we normally experience. But it's, again, what we expected was going to happen.

[Operator Instructions] And our next question will come from Robert Dodd of Raymond James. Please go ahead.

Hi, guys. So on the capital allocation, if I can, I mean, you mentioned obviously buybacks of one thing. It does appear that you've now created an entirely new group for corporate development, maybe with the focus on M&A with cash component, right, joining recently. So is that something -- should we read anything into that, the M&A is ratcheting up in the potential ranking for how you plan to allocate capital going forward?

Yes, I think if you go back and listen to the last couple of calls, Kevin has been a little bit more excited about M&A than maybe he had been in the past. And it's always been an area of focus for us, but we had an opportunity to bring on board [Rikesh] really excited to have him join us. I worked with them previously and I know he's the right person to lead this effort for us as we begin to expand our focus a little bit more dramatically here in the near-term, looking at ways that we can drive meaningful growth and incremental value for shareholders.

Okay. I appreciate that. Next on the Brazilian portfolio, the NPV market, if I'm correct, that was a 2021 portfolio where ERC was reduced by about 30 million, the NPV is 20 million. Can you give us any more color on what happened? I mean, 2021 is not that long ago when you underwrote that portfolio. And so that seems quite a sizable revision in curve expectations for something that was invested in relatively recently?

Yes, you're right. That's one that was -- yeah, we weren't thrilled with that either, but it underperformed right out of the gate. And we've made an assessment that maybe it had some different customer treatment than what we thought in the underwriting prior to sale. And so we've taken the curves down to sort of in line with how it's been trending performance. We reduced the overall amount of expected collections on it. But we'll see what happens with that over time. Certainly, the team there would like to claw back some value on that, but it was less uncertain. So we had to take the write-down on it. And as I said in the prepared remarks, it's a joint venture structure. So we share a portion of that back with partners through the non-controlling interest line in the P&L.

Concludes our question-and-answer session. I would like to turn the conference back over to Kevin Stevenson for any closing remarks.

Hey, well, thank you, operator and thank you, everyone for joining us this evening. We do look forward to speaking with you again next quarter. Thank you.

The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.