PRA Group, Inc. (NASDAQ:PRAA) Q2 2023 Earnings Call Transcript

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Robert Napoli: Great. Thank you. And then, Vik, just from an operating perspective, I know you’ve talked about areas of underinvestment and I know we’ve talked about that before. Can you maybe just give an update on versus not just insourcing, outsourcing, but just overall where the underinvestment has been and where you see the biggest opportunities to make improvements?

Vikram Atal: Look, I think, I look at it similar to what we’ve all experienced as consumers, Bob, where the world has changed and over the last 10 or 15 years in terms of the infrastructure, the capabilities that exist outside. How do we bring that level of thinking and investment into the company, right? So we’re looking at our core operating platforms. We’re looking at the supporting infrastructure. We’re looking at the efficient management of data. We’re looking at policies and procedures that are updated or reflect both customer needs and customer expectations. And this is a sort of broad exercise that, for a variety of reasons, the company did not fully do over the last several years. They were running a lot of other things really well.

Like I mentioned, our underwriting processes are terrific, right, really exceptional. But there were other things that might have been done in years past that were not. And so we’re looking at all of that. And we will — overtime time will determine the value that we can create from that. But we’re encouraged by the early start.

Robert Napoli: Thank you.

Operator: The next question comes from David Scharf with JMP Securities. Please go ahead.

David Scharf: Hi. Thanks for allowing the follow-ups. Taking a step back, I’m wondering, last quarter there seemed to be more discussion about just the state of the US consumer, the macro backdrop, a weaker tax refund season, and so forth. I mean setting aside the variances to forecast, are you telegraphing any different near-term outlook on collectability in the collection environment or the comments from last quarter pretty much hold steady?

Pete Graham: No, I think we had done a lot of communication around our interpretation of the various data publications by the Fed and others just trying to broadcast kind of where we thought we were in the cycle. I think that data, nothing’s really changed there, and I think we continue to see the migration in delinquency and charge-off metrics. And on balance that’s a good thing for us in terms of increased supply and more favorable pricing dynamic. So the fact that we didn’t go into lots of detail on more economic statistics isn’t an indicator of anything other than we thought we had made that point in prior quarters and didn’t need to keep beating that drum.

David Scharf: Got it. Appreciate it. And maybe one last question. And this isn’t meant to pin you down in any kind of forward guidance, but within the — I’m trying to understand sort of the margin structure that ultimately you hope to achieve with a lot of the cost efficiencies, outsourcing, rationalization. I mean if we think about your guidance of exiting the year at about a 60% cash efficiency ratio, and then looking at the abnormal 2021 pandemic stimulus-driven 65% ratio as maybe a ceiling, I mean do you ultimately after all of these operational moves, do you think that this is a business that could operate closer to that 65% in a normal environment or is this all kind of meant to sort of stabilize things at a predictable 60%, 61% level?

Pete Graham: No, I think our goal is to be 65% and potentially beyond that in years to come. And I think given the focus that we have on efficiency and the impact that some of these opportunities could present for us, I think that’s eminently doable.

David Scharf: Got it. Very helpful. Thanks, Pete.

Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Vik Atal for any closing remarks.

Vikram Atal: Thank you, everybody, for joining us today and really, truly appreciate your support of PRA. Thank you.

Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.

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