PRA Group, Inc.

Good afternoon and welcome to the PRA group conference call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Ms. Darby Schoenfeld, Vice President of Investor Relations for PRA Group. Please go ahead.

Thank you. Good afternoon, 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 statements during the call which are based on management's current beliefs, projections, assumptions, and expectations. 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 expectations. 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 investor 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 Q2 2020 and Q2 2021, unless otherwise noted, and our America's results include Australia. During our call, we will discuss adjusted EBITDA and debt to adjusted EBITDA for the 12 months ended June 30, 2021 and December 31, 2020. Please refer to the appendix of the slide presentation on our website during this call for reconciliation of these non-GAAP financial measures to the most directly comparable U.S. GAAP financial measures. And now I'd like to turn the call over to Kevin Stevenson, our President and Chief Executive Officer.

Well, thank you, Darby. I'd like to begin the call this evening like those of the last year and a half and send our thoughts out to those who have been impacted by COVID. It seems as though every day there are additional challenges associated with this pandemic, and it's our hope that we can continue to address those challenges and move forward. I hope to see more acceptance of the vaccine, and I'll share that we plan to further our efforts to educate and promote, and I hope everyone listening is doing the same. It's become clearer and clearer these days as each day goes by. We find ourselves talking about two separate groups Those who are vaccinated, those who are not. We need vaccination rates to rise in order to move forward toward more normalized life, and I hope we can all work together to achieve that. Moving on to the second quarter overview. In Q2, we collected $544 million globally. This production was the second highest quarter in PRA history, just behind our record-setting first quarter of 2021. This was driven by record European cash collections, which increased more than $50 million compared to the second quarter of 2020, and more than $8 million compared to last quarter. Net income attributable to PRA Group for the quarter was $56 million. Portfolio purchases for the quarter were $220 million, with Americas generating its largest quarter since the second quarter of 2020. and Europe recording its second largest Q2 since being acquired by PRA back in 2014. Our strong quarterly performance is yet another in the line of outstanding results that we've delivered in the past year and a half. I believe that our past decisions and investments have contributed to our sustained positive performance. As it relates to 2021, two come to mind. First, we held to our pricing discipline in Europe from 2016 to 2018, when we saw intense and, in many cases, irrational competition. We then invested heavily in NPLs in 2019 and 2020, when the market became more attractive. And due to the longer duration of the collections period in Europe, we are seeing the impact of those purchases today. These results are a testament to our dedication to our disciplined long-term approach to portfolio purchasing. Second, over the past few years, we've made significant investments in digital and data. We built new global digital payment portals, strengthened our global data analytics capabilities and talent, and we've seen benefits of these actions with year-to-date growth in our global digital collections of 50% and an outstanding first half cash efficiency ratio of 67.4%. In both of these cases, you saw the power of a global enterprise. and we were able to effectively execute each because of our diversified footprint. We moved investment volumes around the planet in order to mitigate areas of competition, and we also shared technologies and lessons learned around the globe in the digital and data space. Looking even further back, while we're focusing on past investments, it's fair to say that one of our most important investments was our move in 2014 to strongly enter the European market broadly, and diversify our products in our markets. Moving on, productivity continues to be strong in the U.S. call centers, increasing from the high bar we set in the second quarter of last year. We continue to collect significant amounts through our digital platforms, and same as last quarter, digital collections exceeded those of our largest two call centers combined, but by even a higher percentage in Q2 than in Q1. We have a lower inventory of accounts in our legal collections channel, and as a result, lower collections. This is largely due to strong performance in digital and call center collections, decreasing the need to move accounts in legal. It's a positive trend since we'd prefer to work with our customers via non-legal channels. But another component of lower legal collections, however, was our decision not to seek new wage and bank garnishments during COVID. We halted those efforts in March of 2020 and did not start them until around July 1st of this year. And based on our research, many collectors and banks either never stopped or they restarted last year. In Europe, our productivity levels remained strong and we delivered record cash collections despite the majority of the workforce being in a work from home status. While some countries remain in varying degrees of lockdown, we saw little impact to cash or normal business operations, including the legal collections channel. Digital cash collections, while on a smaller scale, are growing at even a faster pace than in the US. Portfolio purchases were $220 million during the quarter, an increase of $61 million from the first quarter of 2021. In the Americas, we invested $114 million, and this was the first quarter since Q2 of 2020 that we purchased more than $100 million. We've been monitoring some of the credit trends, and based on what we are seeing, it appears as though Q1 2021 may be a turning point in the environment. There are a few items we've been tracking. So first, we started to see increased lending trends at creditors. According to the Senior Loan Officer's Opinion Survey on Banking and Lending Practices for July 2021 by the Federal Reserve, banks have continued the trend from Q1 of easing standards for credit cards, reducing minimum required score, and increasing credit limits. Second, according to Federal Reserve Bank of New York, credit card balances increased $17 billion sequentially, a little over 2%. during the second quarter, which is reversing the trend during the pandemic. And the third, consumer spending has been increasing in 2021. And finally, credit card charge-off rates in the US were in the 3.5% to 4% range during 2017 to late 2020. But during the fourth quarter of 2020, we saw this number dip to its lowest level in quite some time. However, in Q1 2021, it ticked up almost 40 basis points or a 14% increase to almost 3% again. It's still early, but these are positive trends for our portfolio purchasing outlook. In Europe, we see a somewhat different environment. We mentioned on the last call that we saw a healthy pipeline, and that is translated through to our numbers for the quarter. Portfolio purchases in the quarter were $106 million, And this is the second highest European Q2 investment level since we became a global enterprise in 2014. We're starting to see more normalized volumes coming to market, and we're excited to see more portfolios offered for sale during the second quarter than we had originally expected. The European pipeline for the second half of the year continues to look strong, and it's our belief that the market opportunity will be larger in 2021 than it was in 2020. With that, I'd like to turn things over to Pete to go through the financial results.