Good afternoon, and welcome to the PRA Group Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the call over to Ms. Lauren Partin, Vice President of Global Financial Planning and Analysis 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-looking 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 Q3 2020 and Q3 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 September 30, 2021 and December 31, 2020. Please refer to 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 U.S. GAAP financial measures. I’d now like to turn the call over to Kevin Stevenson, our President and Chief Executive Officer.

Thank you, Lauren. I'd like to begin the call this evening, once again, sending our thoughts out to those who have been impacted by COVID. After almost two years of the pandemic, we are still faced with challenges that impact our daily lives. It's my hope we can all move together and help each other during these very difficult times. Now moving on to the third quarter review. In Q3, we collected $488 million globally. This was driven by strong European cash collections, which increased almost $30 million compared to the third quarter of 2020. This brings year-to-date global cash collections to almost $1.6 billion, which is 4% ahead of our record 2020 year. Net income attributable to PRA Group for the quarter was $34 million. Quarterly portfolio purchases were almost $400 million, one of our largest Q3s on record. Our investments in the quarter reflect the power of our geographic diversification as we invested broadly across our platform in Europe and the Americas. Importantly, looking beyond our funded purchases, we also have built a significant pipeline for the future. At quarter-end, looking out generally 12 months or less, our future forward flow commitments totaled $874 million. Finally, during the quarter, we repurchased $74 million of our common stock. This was part of the $150 million plan that was approved in Q3. The $74 million deployment equated to 1.8 million shares at an average price of around $41 a share. As you may have seen in our press release dated November 1, our Board has approved the topping off of our share repurchase program by adding an additional $80 million. So in summary, over the past two quarter, we approved $230 million of buybacks and of course, $74 million of that was deployed in Q3. This quarter’s strong performance from…

Thanks, Kevin. We have continued strong performance with total revenues of $264 million for the third quarter and $839 million year-to-date, which represents 6% growth from the prior year. Total portfolio revenue was $257 million with portfolio income of $213 million and changes in expected recoveries of $44 million. During the quarter, we collected $46 million in excess of our expected recoveries, bringing the total for the nine months year-to-date to $224 million. The reduced level of cash overperformance in the third quarter was a result of forecast adjustments made in the first and second quarters in some geographies to increase near-term expected collections, bringing them in line with recent performance and collection trends. We've applied a consistent approach in our ERC forecast for this quarter as well. Operating expenses were $186 million, a $7 million increase from the third quarter of 2020. This was driven primarily by increases in compensation and employee services, outside fees and services and other operating expenses. The effective tax rate for the nine months ended September 30 was 21% and we still expect to be in the low 20% range for the full-year. Net income attributable to PRA Group was $34 million, which generated $0.76 in diluted earnings per share for the third quarter. The corresponding nine months year-to-date was $149 million, generating $3.24 in diluted earnings per share, an increase of 25%. For the quarter, cash collections were $488 million. For the first nine months of the year, Americas collections were $1.1 billion and are ahead of our expectations for the year. We continue to see good operating metrics in our U.S. call centers and digital platforms and collections in those channels were slightly higher than 2020. This was offset by decreases in U.S. legal collections, reflecting the lower inventory of accounts placed…

All right. Well, thank you, Pete. We are committed to delivering long-term results and our focus on our strategic objectives continue to contribute to our success. Maintaining a conservative balance sheet as always played an important factor in our performance, and this quarter and the past few years have demonstrated the benefit of this approach. We had a record purchasing in 2019 followed by very strong 2020. These trends have continued in 2021 due to the effective and diverse platforms coupled with our seasoned teams in a broad range of markets. Creating an enterprise that is not dependent on any one country's economy and has enough capital and the flexibility to shift that capital globally has been a journey PRA has traveled since 2012 when we first entered Europe. Our expansion has been well planned, well executed and accomplished at a sustainable rate. Today, we believe we are well positioned not only to deliver results, but also to deliver additional shareholder value through repurchases. And all of this is accomplished without stress on our balance sheet or operations. We have an amazing team to help us accomplish all that we've set out to do. So thank you again to all of our employees who have contributed these results, you are what makes us successful. With that, operator, we are now ready for questions.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And the first question will be from Bob Napoli from William Blair. Please go ahead.

Thank you. Good afternoon, Pete and Kevin.

Hi, Bob.

So nice to see the big jump in purchases. Maybe a little color on what you saw in the market that led to that level of purchase and maybe a little more color around the forward flow? Where there any changes in IRRs or the competitive environment that allowed you to have that much success on the purchase front?

Yes. That's a great question, Bob. And it's a big one all wrapped into one. So I'll just start. I said the word diverse platform, I don’t know how many times in my prepared remarks. But that's – at the end of the day that's the key to the whole thing. We have been purposefully focused on our strategic objective of expanding products and market share. And so that's been something we've been working on operational excellence, we've been working on collecting data and all that. So this quarter has been really interesting. Pete talked about the concept that in 2017, 25% of our buying came from Europe and this quarter was 50-50. And even in Europe then we diversified more broadly across Europe. I think we've talked about the deal in Norway. The [ex-seller] actually put a press release on that. It was over a $100 million. And so that's really – yes, it's been a concerted effort to continue to build expertise around the globe. Another one was South America. We had a pretty sizable purchase down in South America as well. The flow itself – we don't want to disclose too much about it, but in short again, what you saw in the numbers is just the first 11 months of it. There are provisions in it that really at our option several situations exist where we could exit that flow. But it’s three years and I guess, I'll say that the maximum contractual amount of that over a $1 billion for that three years.

Great. Thank you. And then South America, what are the IRRs in South America versus other markets? It seems like that would be a market where you would want to have somewhat higher IRRs given maybe a less stable environment for that purchases. So we're not sure if there’s any…

Yes. I'll give you color on that. That's completely true. The IRRs are higher down there, but they're risk adjusted, right. And to your point so – and I didn't answer other part of your question about IRRs. Pricing has come in a little bit obviously from 2020. I guess I would count them more in line of 2019, and I think that just broadly the markets in the U.S. while certainly competitive have remained rational.

Thank you. And then just last question for me. On the cash collection side, have you been able to track any changes in cash collections as government stimulus has been winding down, I guess?

I don't know that we’d attributed directly to that. We certainly expected that we would see some normal seasonality in the collections this year and we have seen that. And so that's part of the reason why the year-over-year comparison to the third quarter of last year is really a tough comparison given all the stimulus that was in the environment last year. So we feel like we've made adjustments to our ERC forecast in the last couple of quarters to try and get kind of closer to the pen in terms of what the trends are. And we saw the results of that this quarter.

Great. Thank you. Appreciate it.

The next question will come from Mark Hughes with Truist. Please go ahead.

Yes. Thank you. Good afternoon.

Hey, Mark.

Hey, Mark.

How does the pipeline look now? I think in the release you described how you had a good pipeline in 3Q and sounds like you did some very large meaningful spot purchases. How should we think about the pipeline for 4Q and then the next year?

Well, I gave some color, I don’t know if you joined later or not, but I gave some color on the large flow that we contracted with in Europe. I will stay by the concept that European volumes remain strong. And I talked about in my prepared comments that we think we're in a trough in the United States and we're starting to now see purchasing balances and delinquency rates start to tick up. So we would expect to see more volume in the U.S. coming into 2022 and then probably continued strong volumes in Europe.

How much visibility do you have on the South American Brazilian portfolio? I know part of your investment process has been to collect data. Could you give us just some sense of how much confidence you've got in your outlook here on this meaningful portfolio?

Yes. So the meaningful one in South America?

Yes.

Yes. We've got – we've been in there since 2015, so then I can dive into, the outlook is obviously harder to look at, but the outlook as far as the portfolio we bought, we're very confident in it. We've got some great operators down there. We've been there for six full years. We've been working in on South America for longer than that, but we've actually functionally been in South America since 2015. Now we're very confident and again, I wouldn't have bought it if I wasn't confident that we could perform on it.

That's helpful. Thank you. And then one other question, Pete, on the expenses. Is this kind of the 64? Do you think that's run rate efficiency? Is there still some tailwind that's in this year that may not recur next year? And then specifically on the legal front, any plans or outlook for legal spending to reaccelerate?

Yes. Sure. I think, we peaked this earlier this year in the first quarter on the efficiency with two rounds of stimulus in that quarter. And so we had expected it to sort of soften as we came into the back half of this year. I think the level we're operating at now kind of the quarterly level is probably a good run rate going forward for the next couple of quarters anyway. But our expectation is that we'll continue to drive efficiency improvements over time. With regard to the legal investment, our inventory still continue to be at relatively low levels, particularly in the U.S. just because we've been having such favorable interaction in the call centers and digital. So I don't see anything that's going to cause us to deviate from that trend at least in the near-term.

Thank you.

[Operator Instructions] The next question will be from Robert Dodd from Raymond James. Please go ahead.

Hi, guys. One housekeeping one first again, for modeling. The outside fees and services were up pretty substantially this quarter. Was there anything unusual in there? Or is this a function of some of the other initiatives you've taken and you'd expected to stay at this kind of level going forward?

I mean, it was a somewhat elevated level of legal expenses is driving that, particularly in the year-over-year comparison, but nothing really out of the ordinary. I'm not sure I would run rate that level, but nothing really more to say than that.

Okay. I appreciate that. And then on the – the question on forward flows versus capital deployment maybe not expectations. In a normal year, and I realize nothing about the last two years has been normal. What percentage of purchases come from forward flow agreement versus spot?

I don't know that number off the top of my head, but I would say, generally, the U.S. market has historically been much more forward flow-based upwards of 70% in any given year would be coming from forward flows. In the European market, not so much. The UK market has been developing more of a forward flow approach. And again, it's all around how the sellers view charge-off and how they're going to manage charge-off. So the countries like the U.S. and the UK with a stricter regulatory regime around dealing with non-performing loans will be the ones where the banks are more programmatic around debt sale, and therefore, better able to forecast volumes that they might be bringing to market, which lends itself to forward flow agreement. Outside of U.S. and in the UK, we are largely in spot deals driving the market.

Got it. I appreciate that. Thank you.

Ladies and gentlemen, this concludes our question-and-answer session. I'd like to turn the conference back over to Kevin Stevenson for any closing remarks.

Thank you, operator. I just wanted to thank everyone for joining the call this evening. And we look forward to speaking with you next quarter.

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