I think maybe just in the interest of time, we can go ahead and get started.
Absolutely. Okay, good morning, everybody, and welcome to Sidoti Small Cap Conference. My name is Brendan McCarthy. I'm an analyst here at Sidoti, and I'm pleased to welcome PRA Group. Leading the discussions from the firm will be President and CEO Vik Atal and CFO Rakesh Sehgal. Before I hand it over, a quick reminder: the Q&A tab is located at the bottom of the screen. Feel free to type in any questions throughout the presentation. With that said, I'll pass it over to Vik.
Thanks, Brendan. Appreciate that. And thank you for everybody that's joining us today. Before we begin, I'm sort of required to share our forward-looking statements, which I'd encourage you to review at your leisure. For those that are not familiar with PRA, a sort of 30-second recap: we've been in business for about 25 years, have a terrific track record over that period. But unfortunately, a combination of both external macro circumstances as well as some internal gaps in operational issues led to us reporting a sizable loss in 2023. That led to a change in management and led to my stepping into the role of the CEO of the company in March of 2023, having served on the board of PRA since 2015.
In the time period since then, and we'll be talking about the transformation and the activity and work we're doing, we have revamped the senior leadership team, 80% of which is now new to PRA or new in role. All of the team has got deep and significant financial services experience, and we have today a standout team operating the business and working with real urgency to drive value creation in the company. Just leading on from there in terms of giving a perspective on, for those that are not familiar, what we do and the size of the business. On the right-hand side, you can see a bunch of key metrics that we profile from at each of our quarterly and business outlooks.
And I would say the takeaway is the numbers are large, and the growth rates on the numbers are significant in terms of our ability and the track record and the trend that we're seeing. And we'll be speaking about these in a few minutes. On the left-hand side is a pictorial diagram that sort of defines where we play in the consumer credit ecosystem. So financial institutions originate debt. We buy principally credit card debt. So we'll speak about credit cards as sort of the proxy for our business. Some of those customers over time that have been originated may fall into delinquency status.
To the extent that they don't get cured in their delinquency status by the originating creditor, the creditor charges them off and then has an optionality to either manage them internally themselves or to sell them and generate capital that they can then deploy back into their business. If they choose to sell the receivables, that is when PRA enters the equation, buys the receivable, and then works with those customers out over an extended duration of time to collect and sort of create value for our own business. That is really essentially our role in the consumer credit sector. On the right-hand side, you can see that the metrics are outlook in terms of how much we buy. That is about $1.3 billion that we bought in the last 12 months, up 9%. We'll be speaking about that.
How much we collect on that, which is $1.8 billion, growing at about 10% year on year in the last 12 months. And then what we have as remaining collections on our business based upon everything that we have bought to date, that is $7.3 billion, up 22% year on year growth. And a return on average tangible equity, which is a metric we've laid out as one of the metrics that we're tracking to that is now trending at year to date at 9.4%. We'll be speaking about that. As I said, we operate in 25 countries or 25 years track record, and we operate in 18 countries. We are probably, in our estimation, likely to be the most diversified player globally in the non-performing loan sector. And that's really good positioning for us.
With regard to the business overview, in terms of having bought that, what do we do? So it's sort of three stages. We underwrite the asset, which requires us to have deep seller relationships and deep access to data, which is proprietary models that are backed by 25 years of information sets. We then have to assess the customer that we have purchased to say, do they have the ability to pay and the willingness to pay? And that is a process that gets continually refreshed because obviously customer circumstances change on a regular basis. And then based on that, we then determine, for example, the frequency of contact that we will contact them, the offers that we will make to them, the channels we will use to drive that.
And then obviously, once we've determined that, then we have to execute on that through our collection activity, whether that's on the call center, legal channels, other channels, digital, et cetera, and then determine what the offer configuration might be. So do we ask them to make a single payment, multiple payments, payment plans, short duration, longer duration? So it's a complex business, but we have a great track record of managing it through this business. And on the right-hand side, you can see that we are well diversified both in terms of the source of cash for us between legal and call center and our distribution geographically between Europe and then Americas and Australia. And as I said, that diversification is key to our ability to sort of work our business through the sort of economic and macro credit cycles.
As I referenced, we have a terrific track record out over time, and you can see that we've had profitability ranging from 2006 up until 2022 through multiple cycles through the global financial crisis, through COVID, and then obviously, we had an unfortunate dip in 2023, but as we're laying out in 2024, we've got a strong rebound on the business, and we'll be speaking about not only what we've done to drive the rebound, but what we're doing with regard to our expectations forward, so really, there's four factors that sort of support the growth in our investment thesis and our perspective on the value that we will create out over time. The first is favorable industry dynamics. We'll speak to that. The second is a really differentiated European business that has got a terrific track record. A third would be the US transformation that is underway.
And then obviously, the fourth would be the financial profile that is a culmination of the first three as well as our capital and balance sheet structure. So speaking about the first one, favorable industry dynamics, this is really important. Most of our business, most of the purchases that we make are credit cards. We're using U.S. credit card balances as a proxy to define the sort of tailwind that we have in our business. But we are experiencing today very strong U.S. portfolio supply based on growing credit card balances and the elevated charge-off rates. That is supplemented by steady European portfolio supply because it's a business that has got a finite number of players that can enter the business, particularly in the U.S., because of the complexity of managing across the U.S. and all of the sort of reference I made to having good data.
When the supply-demand equation sort of works in the way that it's working now with higher supply and a finite level of demand from the few players in the industry that are able to buy at this level, that improves pricing, so we're seeing very attractive pricing in the U.S., and we're seeing attractive pricing globally. The U.S. consumer environment is relatively benign. Consumers have obviously had to absorb the adjustments in inflation and interest rates and all of that, but relative to how we've been underwriting over the last 12, 18, 24 months, the consumer environment. Unemployment is at low levels, gas prices are sort of pretty stable, so the consumer environment is sort of fairly stable at this point. Interest rates are range-bound, and the company has absorbed the spike in interest rates that happened between 2021 and 2023.
The regulatory environment, we would state as stable at this point in time. We'll see how the new administration develops their perspective on this industry. At a minimum, it's going to be stable. It might have a slight tailwind around it. If we move to Europe and give you a quick highlight of that, you can see that we've had a terrific track record in Europe. On the estimated remaining collections, that's the value of the future cash we will expect to collect in that business growing out over a 10-year time period. The actual cash collections on an annual basis also growing. Obviously, it was amplified in 2021, 2022 with the COVID level sort of blood checks that consumers got from various governments. That sort of spiked up a little bit. The trend line over time is very strong.
We have a very cost-efficient platform in Europe. As you saw in the earlier chart, and you might see later on in terms of our distribution of business, approximately 40%-50% of our business, depending on what metric you're looking at, is outside the U.S. I would say for those that are interested in tracking the business and understanding more about it, that that's an important vector to indicate that what happens in the U.S. is not, from a consumer standpoint, an interest rate standpoint, doesn't automatically flow into our business on a one-to-one basis because of our diversification globally. In terms of transformation in the U.S. business, we have spoken about this at our previous investor calls and analyst meeting. We have a three-point plan to drive value creation and transformation of the business.
The first is to make sure that we are optimizing our investments, so we're buying the appropriate portfolios at the appropriate prices and returns. We'll speak about that in a second. Second is to make sure that we're operating and executing on the business in the optimal fashion. We've got some examples about the work we've done there, and the third is to manage our cost structure and to optimize it so that we're spending the appropriate amount of money relative to the value we're getting from the cash collections, and all of that should drive enhanced profitability. It's a deep business. There's a lot of information that we could share with you. The next few slides will really just give you an example of the work that is underway and how we see the business evolving, so if we flip to the next slide, we talk about quarterly investments.
On the right-hand side, you can see that on a year-to-date basis, what we have purchased has been higher than any period in the last five or six years. That's an indication of the tailwind that we are seeing in the investments. And on the top, on the right-hand, on the left-hand side, in the sort of bullet point we have there, the pricing has improved. So relative to early 2023, comparing purchase price multiples, which is an indicator of the price we're paying or the expectation we have on future value we will get from what we're paying for the portfolio, that has moved from 1.75 to 2.1. So that's a material change, 20% approximately improvement in pricing in a very short time period. So that's very encouraging, and that should persist into 2025. That's the important vector as well. In terms of operational execution, just one important example.
As you saw in that earlier pie chart, 40% plus of our global collection cash comes from legal. A similar and quite large percentage comes from. It's the same number that would apply in the U.S. And this is an example on the left-hand side of the multiple stages that we need to work our customer and the file through when we choose to file legal on a customer. And it extends out over an extended time period. On the left-hand side, you can see references to how much improvement we have made in a very short time period on reducing that cycle time. So if you collect the same amount of cash, but you collect it on a shorter cycle time, that obviously improves NPV. And then we've got sort of significant value we've created on the post-judgment phase, which is item number five on this page.
The sort of net of all that is you can see the dramatic change in U.S. legal cash collections in quarter three 2024 versus quarter three 2023, up more than 50% in a very short duration. We've been asked about whether the activity now has been optimized, and my answer is no, we are on a journey and that this is still something that we will continue to expect to see improvements and increases on out over time, and then a third piece, speaking about managing expenses, the business, when I came into this role in early 2023, none of our U.S. call center activities were located outside the U.S., so we were supporting all of our contact center with U.S.-based collectors. That was different than our major competitors in the U.S.
It was different than most companies across sectors have leveraged labor cost arbitrage in lower-cost locations. So we were at zero. We have reported that we have moved to 25% of our collectors are now supporting the U.S. business are now located offshore at quarter three 2024. And in the second half of next year, we would expect that number to be 50% and possibly slightly higher than that as we look out over time. And that's an example of the work we've done to reshape our cost profile over time. And that's resulting in very attractive efficiencies in our business in terms of our cash efficiency ratio. I think we'll transfer it across to Rakesh to speak about our capital structure and then some financial information. And I'll wrap it up before we take some questions at the end. Great.
Thanks, Vik. We do operate in a capital-intensive industry. So it's important to have continued access to capital at attractive pricing and maintain moderate leverage. We believe we check both boxes. We fund ourselves through a combination of both bank debt as well as bonds. And our current debt-to-cash EBITDA leverage is three times. As you can see on the chart, as of September 30th, we had $3.1 billion of committed bank lines with $1 billion of availability that is subject to both borrowing base and debt covenants. We have had really good, strong relationships with our lenders that goes back several years. A good example around this relationship is in October, we amended and extended our $2.3 billion North American and U.K. credit facilities to 2029.
And also last month, we issued $150 million of add-on senior notes that are due 2030, the proceeds of which were used to repay our borrowings under the North American credit facility. And both actions, both on the bank debt refi as well as on the bond issuance, really demonstrate our continued strong access to capital. So in summary, on the capital structure, I would say that we have a strong balance sheet. And as you can look at the maturity profile, the next maturity is not until November 2027, really giving us the financial flexibility that's required to focus on transforming and also growing our business.
If you look at our business today, it is clear that the combination of the industry dynamics that Vik mentioned, the strong European business, the steadily improving U.S. operations is really contributing to much more robust financial results over the last few quarters. We've made disciplined investments at attractive pricing, which has really helped us grow our ERC to a record $7.3 billion. That represents a 22% growth quarter over quarter, as you can see on the chart on the top right. It's really the combination of portfolio investments along with our cash-generating initiatives that Vik talked about that have really helped drive double-digit cash collections growth year to date. You could see quarter over quarter, it's 14% on the bottom left chart and 12% year to date, 2024 versus 2023. Look, at the same time, we have been very focused on managing our expenses.
All this has resulted in a sharp improvement in our net income over the past year. However, we still believe there's a strong and long runway ahead of us for driving growth, building profitability, and creating meaningful shareholder value. So in early 2024, we laid out a set of financial targets for the year. And now sitting here in December, with less than one month left in the year, we are on track to achieve each of these targets in 2024, including a Return on Average Tangible Equity of 8% plus, which is up actually from a previously announced 6%-8% in early 2024. And then as we look ahead, our focus is to continue building on our positive momentum. Last month, in conjunction with our Q3 earnings, we announced our 2025 targets. And number one, it's another year of strong portfolio investments capitalizing on the supply tailwinds.
8%-10% cash collections growth, which is relative to the double-digit growth we had telegraphed for 2024. And then 60% cash efficiency in 2025. And the last one being double-digit return on average tangible equity relative to the 8+% I mentioned for 2024. So we believe we are well positioned to really grow this business. So I'll turn it back to Vik for some closing remarks.
Thanks, Rakesh. Look, I think in closing, I would just make a few points. One is that I believe we are operating in a truly exciting time for our business with clear catalysts for growth in the form of both industry dynamics and compelling fundamentals for our business. Secondly, our US business has already demonstrated sort of the signs of improvement and is on track for future growth, while our European business continues to differentiate from peers and build on a strong track record. So that's the second point. Third is, as Rakesh pointed out, we have a
strong capital structure and liquidity to take advantage of what we've got. And the fourth is that we are still, from my perspective and the senior team's perspective, in the early innings of our business transformation, but our results are really encouraging. And I think that sort of sets us up for continued value creation out over 2025 and then beyond. And with that, we're open for engagement and responding to any questions you might have. So Brendan, I'll turn it back to you to moderate that.
Fantastic. Thanks, Vik. Thanks, Rakesh. We can open the floor for Q&A here. It looks like we have a couple of questions from the attendees. Our first question here is, you've been buying heavily this year to take advantage of good buying conditions. At what point do you expect to back off to avoid excess leverage?
I think I can take that, and Rakesh can supplement that. As I don't know if Rakesh mentioned it here, but look, our long-term leverage range, depending on where we are in the cycle, would be between two and three times. We are obviously at the high end of that range, just given where we are with the buying experience we have. We would anticipate that, and we've signaled this externally in our conversation, that as we go through 2025, the monetization and the cash generation from what we've recently bought, supplemented by the fact that the
spike in buying is probably going to abate as we get into 2025, should allow our leverage ratio to sort of trend back down through that range. And so we would be deleveraging as we go forward. To the question of, are we going to back off buying? We don't feel that today we need to back off buying to control our leverage ratio. I think that's going to be a natural consequence of where the market dynamics are going to fall out. But Rakesh, maybe you want to supplement that.
Yeah, look, we are at $975 million in total investments here to date. We telegraphed $1.4 billion to end 2024 and $1 billion plus for 2025. So while we're at the leverage of three times, we believe this is the right time to continue to invest. Where I get very comfortable is from a leverage perspective, we have a natural governor in our credit facilities of three and a half. And we obviously want to capitalize on the investment opportunities. But as we drive greater cash through all the initiatives, we should see some natural deleveraging. And we telegraphed that on our earnings call also that in 2025, we should see some deleveraging happening in 2025 as we work through that year. And then, as Vik said, look, the way we think about leverage is leverage is going to go up in environments like this where we have strong buying environment. Then over time, as the cycle turns, we will have deleveraging.
Got it. And on the investment side, maybe you can talk about the purchase price discount, how you determine that discount, and maybe how that discount has trended over time.
Look, it's a competitive marketplace, Brendan. So almost everything we're buying is sort of in some form of an auction, right? They put out the file for bid, and we sort of leverage our historical information sets and our perspective on the business and the reference data to decide what we're buying. If you go back and look at it over a long time period, if you go back and look at what we were buying in 2014 and the purchase price multiples that we were reporting in 2014 are higher in 2014 than what is happening today. But the circumstances have
changed dramatically. If you look at what's happened to our purchase price multiples between what we bought in early 2023 to what we're buying today, they're dramatically higher, right? 1.75-2.1. That's a function of the demand and supply equation, as I mentioned. At this point in time, given the mix and the persistency of where we see the environment shaking out, we would see that the purchase price multiples will be range-bound within what we're buying as we look out over the sort of horizon that we can see in 2025.
Got it. And are there any geographies that are more profitable than others, and why?
No, I think when we make our investment decision, we make it globally. We have a global investment framework. We have a global investment manager that runs our business across every market. And there's a lot of variability in the business. If you buy, for example, a portfolio that is already paying, that has a different purchase price multiple on it versus a portfolio that is not paying that we've got to do the work to figure out whether the customer's got the ability and the willingness. If we buy a portfolio that is more heavily weighted to potentially being a legal channel, that has different economic dynamics. So there's a lot of factors that go into deciding on it. But at the end of the day, we're attempting, and we believe that we have a good track record of making the appropriate decisioning based upon the ultimate profitability for the company. And there's no particular market that is more profitable versus less profitable for us.
I mean, simply put, irrespective of geography, product, portfolio characteristics, and there are a number of different characteristics in a portfolio, the goal is ultimately from a net-net perspective, using our global framework, we solve to a return that makes sense across all these moving variables.
Got it. Can you discuss what benefit or impact point change in interest rates would have on profitability?
So I think it's a question of the real question is, what assumptions did you use when you underwrote the file? And what assumptions happened or what actually happens in actuality, right? So if we underwrote a file in 2020, let's say, with an assumption that interest rates would be and we use forward curves when we do that. So interest rates would have been the use would have been forward curves. And then you look out three years later, interest rates are materially higher than what we might have assumed. That obviously has a negative bias, right, towards the underlying profitability, which might be offset by other factors that happen with regard to consumer liquidity and unemployment, et cetera. So recently, we've been underwriting with the forward curves that are in place today.
If interest rates, if the forward curve and the future actuals come in lower than that, that would be potentially upside relative to underwriting. But there's so many other factors, Brendan, that go into the business in terms of consumer liquidity, consumer propensity, inflation rates, et cetera. So all of that flows through the wash. But directionally, on a unidirectional basis, if interest rates came down significantly, that should be a plus to the business.
That makes sense. That's helpful. And we have a question on buying conditions. Do you think buying conditions are still improving, or has it stabilized in recent quarters?
Based upon that, there's a difference between the U.S. and Europe. In Europe, a larger percentage of our buying is spot market, which means customers don't signal, and we don't have long-term portfolio purchases locked in. That depends on the timing of when banks opt to sell the file. In the U.S., our discussions with sellers would indicate that the level of supply is likely to persist for the most part into 2025. That's the best indicator we have. Look, we signaled $1.4 billion for this year, $1 billion plus for next year. We were asked why $1 billion plus when you're making $1.4 [billion]. That's because I don't run the business.
I don't want to run the business on some amplified view on how much we're buying because that could actually result in us investing more in our infrastructure, et cetera, and that may not come to pass. So I don't want to be left with stranded costs. So we're trying to run our business much tighter with regard to the demand-supply equation. And so it might be we certainly think it's going to be higher than a billion. How much higher, we'll know in a few months' time.
Great. Great. We'll wrap up with this last question here. Does there tend to be seasonality in either revenue or profitability during the year?
A little bit, yes. The tax season in the U.S. is an important vector, right, that drives cash collectibility. So we would see that as a vector. And then also the Q1 , because of tax season and because of investments we need to make to ensure that we've got the right contactability with customers, one tends to see generally a slightly elevated level of expenditure in the quarter. And then obviously in our business, over time, as we are improving our business, one should expect to see profitability improve over time as all these different factors come into play.
Great. Well, Vik and Rakesh, we really appreciate the detailed overview. We'll conclude the presentation there. Thanks, everybody, for tuning in.
Thank you, everybody. Appreciate it.
Thanks, everybody. Have a great day.