Mike Grondahl: Got it. $457 million roughly for Cabot and $149 million for MCM. So, there is…
Ashish Masih: That’s correct.
Mike Grondahl: …still a chunk of goodwill. You wrote down about a third of it, roughly at Cabot?
Ashish Masih: That’s right. It was $672 million at December 2022, and then we wrote down $238 million. There’s some FX impacts there as well, but small.
Mike Grondahl: Okay. And you gave a metric about online respondents in the U.S., I think, with first-time payments. I didn’t quite write down the number you gave. I think you said it doubled in the digital channel. But did you also give a percentage?
Ashish Masih: Yes. So, it doubled over the four years to about 33% of — so people who are coming in to pay for the first time through multiple channels, about a third are coming through the online channel now. And it’s pretty consistent in U.S. and U.K. So, MCM, that number is 33%. Cabot is about 32%. So — and it’s pretty much kind of doubled for both over the four years, investing a lot in digital and technology capabilities there.
Mike Grondahl: Got it. And maybe a question for Jonathan. Jonathan, if I back out the goodwill charge, the impairment of the intangible asset and then sort of add back the softer collections number, about $1.05, does that sound right for the quarter kind of on a cleaner basis?
Jonathan Clark: Yes. Actually, if you — on a quarterly basis, Mike, if I take it to in our deck on Page 22, it goes through the add-backs for the quarter, and they total $12.65 in terms of what the negatives were, that we — that Ashish specked out before and I mentioned as well. And so, with netting against a quarter, you’re about at $1.25.
Mike Grondahl: Got it. Got it. And that includes the recoveries below forecast and the changes in expected?
Jonathan Clark: That’s correct. If you took all four items and netting them against the GAAP loss per share, you’d net out to $1.25 positive.
Ashish Masih: And if I could just add, we also noted on that page, the charge we took for Cabot headcount reduction in Q1. So, all of that netted out leads to $1.25.
Jonathan Clark: [indiscernible] Q4.
Mike Grondahl: Okay. Hey, that’s it for me. Thanks, guys.
Operator: Thank you. One moment for our next question. It comes from the line of John Rowan with Janney Montgomery Scott. Please proceed.
John Rowan: Good evening, guys. Did you give the percent of your ERC that’s tied to kind of the underperforming vintages that you called out earlier that are driving kind of the negative revisions?
Ashish Masih: John, we did not. All the CECL charges are around performance over/under as well as changes in ERC and timing. So there’s a whole range of things that go. 2021 and 2022 vintages were — for MCM, were what we highlighted as kind of made forecast corrections, and they’re still strong multiples. But…
John Rowan: Yes. I’m just curious how much they are of the overall ERC?
Ashish Masih: Our 10-K will have that. Let me go to the page. So, if you look at the vintages ’21-’22, they have about $395 million and $769 million in ERC out of a total of $4.3 billion for MCM.
John Rowan: Okay. All right, thank you very much.
Operator: Thank you. One moment for our next question, please. All right, and it comes from the line of Mark Hughes with Truist Securities. Please proceed.
Mark Hughes: Yeah, thank you. Good afternoon. Jonathan, how should we think about the growth in portfolio income if cash collections are growing 8% and if returns on the newer paper are improving? Should the portfolio income grow faster?
Jonathan Clark: If you’re — if I’m following your line of questioning — can you just repeat it one more time? I just want to make sure, I’ve got it.
Mark Hughes: Yes. Just thinking of the portfolio income revenue item, just trying to think about whether that should grow faster or slower than cash collections?
Jonathan Clark: Would that grow faster or slower than? Yes, it will be cash-driven, thinking through whether — just to be honest with you, Mark, sitting here today, it’s unclear to me, other than they’re both going to grow in a very similar way. And I would — since you’re adding — I understand where you’re heading with this. Since you’re adding portfolio with higher multiples, you would think on a percentage basis that it would accelerate faster. But, that’s my intuition. You’re correct.
Mark Hughes: Yes. I guess, that all takes into account what’s rolling off the back end, so to speak. But I’ll go with your first answer there. How about cash efficiency? I think you said for the full year, collections cost expenses up 2%, excluding non-recurring items. How should we think about efficiency or expense growth in 2024? Maybe relative to that 8% collections bogey?
Ashish Masih: Yes. Mark, this is Ashish. So, we do expect — as I said, across the board, we expect our operating and financial performance to turn compared to ’23. So, we expect collections efficiency margin to also improve over the 2023 level. We’ve not provided a specific number, but we expect it to improve given the collections growth we are seeing, managing our cost and the scale effect that comes with that, but we expect it to grow above 2023 level.
Mark Hughes: And then, do you anticipate your leverage will stay below 3% — 3% or below? Or could it possibly inch up above your outlook range or your preferred range?
