Good evening and welcome to the PRA Group Third Quarter 2024 Conference Call. All participants will be in listen-only mode. After today’s presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I would now like to turn the call over to Mr. Najim Mostamand, Vice President, Investor Relations for PRA Group. Please go ahead.

Thank you. Good evening, everyone, and thank you for joining us. With me today are Vik Atal, President and Chief Executive Officer; and Rakesh Sehgal, 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 our earnings press release issued today 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 all be found in the Investor Relations section of our website at www.pragroup.com. Additionally, a replay of this call will be available shortly after its conclusion, and the replay dial-in information is included in the earnings press release. All comparisons mentioned today will be between Q3 2024 and Q3 2023, 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, 2024, and December 31, 2023, as well as the return on average tangible equity. Please refer to the appendix of the slide presentation used during this call for a reconciliation of the most directly comparable U.S. GAAP financial measures to these non-GAAP financial measures. And with that, I'd now like to turn the call over to Vik Atal, our President and Chief Executive Officer.

Thank you, Najim, and thank you everyone for joining us this evening. Our third quarter financial results reflected strong cash collections, robust portfolio buying, significant revenue increases, and solid net income. We also continue to make substantial progress on the journey we began 18 months ago when I took over as CEO. During this time, we have built out a highly experienced senior leadership team, capitalized on the rebound in U.S. portfolio supply, executed on our cash-generating and operational initiatives with intense focus, speed, and discipline, and driven the financial and operational turnaround in our U.S. business while continuing to differentiate ourselves in Europe at a time when some of our competitors in that region have been under pressure. Going forward, we will build on this platform to further optimize our business, drive both top and bottom-line growth, and create meaningful shareholder value. In a moment, I will share more details regarding the transformation and future expectations, but before I do so, I wanted to turn it over to Rakesh for a financial summary of our third quarter results.

Thanks, Vik. We purchased $350 million of portfolios during the quarter, of which $274 million were in the Americas and $76 million were in Europe. Year-to-date, we have purchased $975 million globally, which is a record year-to-date amount for the company. In the U.S., we purchased $231 million of portfolios during the quarter, which is up 35% compared to the prior year period. Year-to-date, we purchased $625 million, up 46% year-over-year. The year-over-year increase for both periods was primarily driven by higher portfolio supply as reflected in the monthly amount purchased under forward flow arrangements. Additionally, our focus on seller relationships led us to win a large spot transaction in the quarter. We continue to capitalize on the strong levels of portfolio supply driven by the growth in industry credit card balances and higher delinquency and charge-off rates. Pricing remains attractive with our year-to-date 2024 Americas core purchase price multiple at 2.1 times. This multiple is consistent with what we observed at the end of the first half of 2024. As we've indicated previously, the European market is more spot-driven, and the third quarter reflected a modest level of portfolio supply. Historically, we have experienced strong levels of portfolio purchases in the second and fourth quarters in Europe and we anticipate the same dynamic this year. Sitting here in November, with one month of October purchasing behind us, and with a very healthy pipeline of deals in Europe, we expect total fourth-quarter portfolio purchases to exceed the $350 million achieved this quarter, with full-year portfolio purchases anticipated to total around $1.4 billion. Before I move on to our financial results, I want to take a minute to discuss our European business. As you can see on the chart, we have successfully grown ERC with discipline over time, leveraging our diversified presence across multiple European markets. Our approach to the business has resulted in a compelling decade-long track record of cash collections growth. This success is in sharp contrast to the challenges faced by a few of our competitors, which we believe is largely attributable to some of them becoming over-levered due to portfolio investments at suboptimal returns and M&A activity during the period from 2016 to 2019. We believe that the breadth of our European business differentiates us from most of our competitors, with a tenured and stable management team, deep seller relationships, a disciplined approach to portfolio investments, and a highly efficient operating structure. We remain well-positioned to take advantage of purchasing opportunities across Europe, especially at a time when others may potentially be scaling back or transitioning to other revenue streams. Moving on to our financial results, total revenues were $281 million for the quarter, up 30% over the prior year. Year-to-date, our revenues were $821 million, up 41%. Total portfolio revenue was $277 million for the quarter with portfolio income of $216 million and changes in expected recoveries of $61 million. Portfolio income, which is the yield component of our revenue, was up 14% year-over-year, reflecting an increased level of portfolio investments and higher purchase price multiples compared to a year ago. Changes in expected recoveries are an important component of our revenue, particularly as we continue to improve operational performance and increase collections from our cash-generating initiatives. Of the $61 million in changes in expected recoveries this quarter, $34 million was due to cash over-performance. The remaining $26 million reflects the net present value of changes in our ERC, the majority of which was attributable to our U.S. score portfolios, driven in part by the impact of our cash-generating initiatives. It's important to note that both the operational improvements that we have executed, as well as others that we have identified and are in the process of executing should continue to contribute to cash over-performance over time. During the quarter, cash collections exceeded expectations on a consolidated basis by 7%, with the Americas over-performing by 5% and Europe over-performing by 11%. Our year-to-date cash collections against our expectations at December 31, 2023, experienced 10% over-performance on a consolidated basis with the Americas over-performing by 9%, and Europe over-performing by 11%. Operating expenses for the quarter were $191 million, which were up $18 million from the prior year period. Legal collection costs were up $8 million year-over-year, driven primarily by investments in our U.S. legal channel to drive future cash growth. While investments in the legal channel create a near-term drag on earnings and cash efficiency due to the timing lag between when we invest in the upfront court costs and when we start collecting cash, we are confident that these investments will drive strong cash collections over the next several years. Based on our current inventory of accounts in the legal channel, legal collection costs for the fourth quarter are expected to be in the low $30 million. As a reminder, our management of the legal inventory is heavy with compliance safeguards and appropriate processes. In addition, we do not begin our collections activity with the legal channel but consider using it if and when our customers do not engage with us voluntarily. Compensation and employee service expenses increased by $7 million, primarily due to lower compensation accruals and benefits-related expenses in the prior year period in addition to higher wage costs in the current year period. Legal collection fees, which are backed by cash collections and thus variable in nature, increased by $5 million driven by higher external legal collections within our U.S. core portfolio. Our cash efficiency ratio was 60% for the third quarter compared to 59% in the prior year period despite the significant increase in legal collection costs. Net interest expense was $61 million, an increase of $12 million, primarily reflecting higher debt balances due to increased portfolio investments. Our effective tax rate for the quarter was negative 2%. This included a tax benefit item of $7.7 million. With the inclusion of this item, we now expect our effective tax rate to be in the mid to high teens for 2024, depending on the income mix from various countries and other factors. Net income attributable to PRA for the quarter was $27 million or $0.69 in diluted earnings per share, which includes a $0.20 per share impact due to the aforementioned tax. Year-to-date, net income attributable to PRA was $52 million or $1.32 in diluted earnings per share, which also included the benefit of the aforementioned tax item. Cash collections for the quarter were $477 million, up 14% from the prior year period. Year-to-date, cash collections were $1.4 billion, an increase of 12% year-over-year. The increase in the quarter was primarily due to higher collections in the U.S. and Europe, driven by higher levels of recent portfolio purchases in both regions, as well as the positive impact of our cash-generating initiatives in the U.S. As we assess our ability to collect cash in the U.S., we closely monitor indicators of the health of the U.S. consumer. To set the context, it's important to note that geographies outside the U.S. accounted for 50% of our global cash collections in Q3, providing significant diversification regarding overall cash generation. Focusing on the U.S., the legal collections channel, which is a growing channel for us, is less impacted by near-term pressures affecting consumers. Given the elongated time period over which we realize cash, the U.S. core non-legal collection channel, which is more susceptible to near-term U.S. consumer pressures, accounted for less than 25% of our global cash collections. It's important to remember also that in contrast to credit issuers who generally need to address and resolve consumer delinquencies over a relatively short period, our underlying business model has a much longer time horizon, allowing us to work with consumers and tailor payment plans according to their evolving financial situations. This gives us the ability to work closely with them during difficult times and continue generating cash over the long term. As the macroeconomic data demonstrates, unemployment rates remain low, and both the rate of inflation and gas prices in particular have moderated since their peaks. While this would suggest an overall picture of a relatively healthy U.S. consumer, we believe certain segments remain under pressure, particularly since prices are higher than they were a few years ago. To the extent there is any material pressure impacting these consumers, we have a number of strategies designed to assist customers and address the related effects on our business. ERC at September 30th was $7.3 billion, representing a company record and up 22% compared to $6 billion at September 30th last year. Year-over-year, ERC grew 38% in the U.S. and 17% in Europe. On a sequential basis, total ERC increased by $491 million. We expect to collect approximately $1.7 billion of our ERC balance during the next 12 months. It's important to note that this number only reflects the amount we expect to collect on our existing portfolio. It does not include the cash we expect to collect from new purchases made over the next 12 months. Based on the average purchase price multiples we recorded year-to-date, we would need to invest approximately $900 million globally over the same timeframe to replace this runoff and maintain current ERC levels. We expect that we can exceed this investment level and continue to grow ERC during the remainder of 2024 and into 2025. Our debt to adjusted EBITDA was 3x as of September 30. Our leverage has ticked up over the last few quarters driven by the significantly higher level of portfolios purchased during this compressed time period and also in part due to the increase in legal collection spend, which will lead to higher levels of cash collections in the future. During periods of higher portfolio purchases, as we are currently witnessing, we would expect our leverage to be at or modestly above our long-term sustained leverage target of 2x to 3x. More importantly, though, we would expect that ratio to decline through 2025 as we start to generate cash from those portfolios. In terms of our funding capacity, we had $3.2 billion in total committed capital to draw under our credit facilities as of September 30. We had total availability of $1 billion comprised of $412 million available based on current ERC and $587 million of additional availability that we can draw from subject to borrowing base and debt covenants including advance rates. During the quarter, we redeemed our $298 million senior notes due 2025 as we had previously announced. Since the end of the third quarter, we successfully amended and extended our North American and UK credit facilities by five years, which now mature in October of 2029. There are no material changes to the aggregate commitment amounts across the two facilities, and our pricing is unchanged. We are grateful for the support of our existing and new lenders, which provides appropriate financial flexibility as we continue to transform our business and drive future growth. Our next maturity is now in November of 2027 when our European facility matures, and we look forward to working with the lenders under that facility, with whom we have longstanding relationships. We believe the cash generated from our business, the capital available under our credit facilities, and access to capital markets in both the U.S. and Europe position us to capitalize on the strong portfolio supply environment. With that, I'll turn it back to Vik.

Thank you, Rakesh. As we approach the end of 2024, it is an opportune time to look back and take stock of all that we accomplished during this timeframe. When we started the year, we had five clear goals in mind. First, capitalizing on the strong U.S. supply environment. Second, turning around the operational performance of our U.S. business. Third, leveraging third parties to complement our capabilities, especially with respect to our offshoring initiative. Fourth, leveraging the strengths of our European franchise; and fifth, rebuilding profitability. As you can see on this slide, we have either already accomplished or are firmly on track against each of these goals. These accomplishments can be directly tied back to our three pillars for enhanced profitability, which we have been sharing now for the past several quarters. One, optimizing investments which allows us to increase ERC and portfolio returns. Second, driving operational execution, which focuses on maximizing cash collected per dollar invested. And third, managing expenses, which is geared towards optimizing our cost structure. Starting with the first pillar, optimizing investments. Based on the data that we are seeing and discussions with sellers, we expect overall U.S. portfolio supply to remain at elevated levels in 2025. In Europe, the forward flow volume estimates we received from banks continue to suggest stable supply volumes in that region. We will be assessing our buying relative to the prevailing economic environment and the returns available in the global marketplace. Our overall expectation is that we will have the opportunity for global portfolio investments to be in excess of $1 billion in 2025. I'll now turn to the second pillar, which is driving operational execution. In addition to implementing a wide range of operational execution improvements in our U.S. call center operations, we have made tremendous strides in optimizing our legal collections channel, which I'd like to focus on now. As a reminder, legal collections activities are only undertaken after we have been unsuccessful in engaging with the customer to resolve their debt obligation or to establish a payment plan. The overall process extends across an elongated timeline, encompassing many different stages. At the start, the decision to place an account on the channel is preceded by a rigorous qualification process based on customer interactions, document and contractual reviews, balance size, and other factors. Only then can the account move to the second step where it is thoroughly reviewed by an attorney for the potential filing of a suit. This is then followed by serving the customer, receiving a judgment from the courts, and ultimately generating post-judgment cash in the form of wage garnishments or other measures. Our intense focus over the last 18 months has been to improve the quality, reliability, and cycle time of this process. Through the enhancements made during this past year, our cycle time at each stage of the process has improved considerably, in some cases up to nearly 50%, helping to generate cash more quickly. We are continuing our efforts to further improve and accelerate these processes. In addition, and as previously described, we have been focused on the effective monetization of the judgments that are currently enforced primarily through wage garnishments. Already through nine months of this year, we have filed more wage garnishments than in all of 2023. The improvement of our cycle times pre-judgment is positively impacting how quickly we can collect cash on our newer vintages. At the same time, the enhancements to our post-judgment monetization have been driving increases in the purchase price multiples in our older vintages. These post-judgment enhancements will in due course benefit performance on newer vintages as they flow through that stage of the process. Overall, these improvements will ultimately make us a more competitive buyer as we are able to reflect that increased value in our bidding processes. Through the investments we have made in the legal collections channel, we have seen U.S. legal cash collections increase from $65 million in quarter three, 2023 to $98 million in quarter three, 2024, a 51% increase year-over-year. Notwithstanding the impact that has already been realized, our work in the legal channel continues to identify additional value embedded in the business. The implication of this is a further catalyst to growth in cash collections, revenue, and earnings. The third pillar to our business turnaround is managing expenses and optimizing our cost structure. To support the growth in our U.S. business, we have increased collectors’ headcount from roughly 850 collectors last year to about 1200 today, with offshore collectors representing approximately 25% of this total, contributing to annualized cost savings of approximately $10 million. Our offshore collectors are performing strongly and in line with our expectations. This is a testament to the hard work that we and our partners have been undertaking to assemble the right teams with the appropriate oversight, knowledge, and support to ensure that our collectors are effective. We currently have two offshore locations and intend to hire more collectors in both locations over the next year, with an anticipation that offshore collectors will account for approximately 50% of our overall collector base supporting our U.S. business by the second half of 2025. Within the U.S., we have successfully piloted a work-from-home program for collectors that provides greater working flexibility with equivalent performance. Our U.S. business is currently supported by collections teams in six sites. Based on the progress of the offshore and work-from-home initiatives, we have made the decision to recalibrate our footprint in the U.S., moving to three operating sites by mid-2025. Together these decisions will collectively reduce overhead costs, create a more variable cost structure, enhance our calling strategies, and help us better navigate the ebbs and flows of the credit cycle. In summary, our results this year demonstrate that we have acted with urgency and decisiveness to drive meaningfully improved results and create a platform for future growth. Our new senior leadership team is highly experienced and working well together to drive strong results with operational rigor and sharp execution. With the year almost behind us, we are well on track to hit our targets for 2024, which now include a higher return on average tangible equity target of 8% plus. Looking ahead, our expectations for 2025 are as follows. First, we expect another year of portfolio purchases to exceed $1 billion at attractive pricing. Second, due to strong projected portfolio purchases and the impact of our cash-generating initiatives, we expect cash collections growth in the range of 8% to 10%. Cash efficiency reflects the timing of certain activities, such as our legal collection costs, but we expect to achieve at least 60% for the full year. And finally, we anticipate achieving double-digit return on average tangible equity, which represents a solid step forward for the business. As you would expect, we are currently in the midst of our planning cycle, and upon closing out 2024, we will firm up our views regarding our expectations for 2025 and beyond. In closing, I am highly encouraged by the progress made and the accomplishments across the entire business these past several quarters. Our work is not yet finished, but it is already clear that the fundamentals of the business have improved significantly in what is truly an exciting time as a company. We are not letting up in our efforts to drive the current transformation in our growth, efficiency, and profitability with the building blocks in place to drive strong shareholder value creation. Thank you as always for your continued support, and we look forward to engaging with all of you very soon. And with that, we are now ready for questions.

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Your first question is from David Scharf from Citizens JMP. Please ask your question.

Terrific performance and execution, obviously. I did want to maybe dig in a little more to understanding how we should think about geographic mix in the context of just returns? Your full year purchasing guidance suggests a substantial fourth-quarter volume. And then in combination with your comment that Europe tends to be heavy in Q2 and Q4, I'm guessing there’s a lot of purchasing activity in Europe. Can you just remind us, are the post-funding, or really just the ROI profile of what you're buying in Europe similar to North America? Or does the ERC mix impact how we think about overall returns?

Yes. Hey, David, it's Rakesh. Why don't I take that one? So, look, you're right, there is a difference between the U.S. and Europe. And as you think about the cash curves, Europe tends to be a lot flatter, and it's a longer tail. Therefore, cash would come in over a longer period of time, and as a result, you'll see that the purchase price multiples in Europe tend to be lower. But again, when you think about the cost to collect and the cash efficiency in Europe because of how they have a bailiff system in certain countries, the cash efficiency tends to be overall higher. But if you take a step back, the way we think about our overall investments and capital allocation, we have a global investment framework and a global investment committee, and we look at all the deals, depending on the appropriate returns that we would have. We would make that investment. So, as you think about the return thresholds when making investments, it’s calibrated against other geographies. But we take into account that the shape of the curves and the way cash comes in and our cost to collect would be different across geographies.

Got it. But it does sound like at the end of the day, a dollar invested in the U.S. versus a dollar invested in Europe, on an NPV basis or return basis are probably pretty similar. You're not going to pass up opportunities in one to optimize the other.

Absolutely.

Okay. Hey, just quickly actually one very quick cleanup question, and then I want to talk funding. I know on some other calls this quarter, particularly for some non-prime lenders, it's been asked whether the hurricanes, particularly in parts of Florida and North Carolina, are going to have any near-term impact on the fourth quarter and Q1 seasonal trends. Is that expected to impact any of your collection expectations?

No, I mean, obviously, we accommodate these situations that our customers face during difficult times. We have to abide by FEMA-related rules regarding our collection practices in areas designated as FEMA-impacted. However, regarding the diversification of our cash collections globally, with a significant portion outside the U.S. and the U.S. collections being split between legal and non-legal, when you look at the few states impacted and the small number of customers in relation to the overall U.S. population, it's not a significant number for us. It may be different for other specialty lenders that focus more on localized or U.S. business.

Got it. Good to know. And then just to wrap up, Rakesh, on the funding side, you walked through some of the recent extension in refi. Can you just remind us the variable rate component of your capital stack and maybe on an absolute dollar basis, just based on where the forward curve is, whether even with increased levels of purchasing, there will be a materially higher dollar amount of interest cost do you think next year versus 2024?

Yes, look, you're absolutely right, David. It's a function of really the forward curves, and we're monitoring that. As you can see relative to Q3 of 2023, our quantum of debt is up around $400 million, but we are definitely looking at where that forward curve is, and it's part of our overall calculus as to how much we invest. I think what we focus on more is where we are from a leverage perspective. This quarter we are at the 3x mark, and we've always said that, overall, a sustained long period, we want to be in the 2x to 3x range, but if the market is such that there are opportunities for us to go beyond the 3x, we would, if it makes economic sense, and our leverage would be moderately higher than the 3x. We've got a natural governor in our facilities of 3.5 total leverage; we obviously want to keep a cushion relative to that. So over time, as we generate cash from all the investments that we have been making in the legal channel, we should start seeing the delevering occur as we go through 2025. And then on the interest expense, we are really, just like yourself, monitoring that forward curve and what that means. We've got a good balance. If you think about the split between bank debt that's floating as well as fixed-rate bonds. Today, it's around 60%. We've got a book that's close to 60% fixed as well. So that will work itself through as we watch the rate environment.

Thank you. Your next question is from Mark Hughes from Truist. Your line is now open.

When we consider the pricing, can we assume that it remains generally stable? I'm looking at your collections, which seem to have stayed consistent between Q2 and Q3, possibly down slightly. Does this indicate that supply in Europe continues to be high or relatively stable? Is this indicative of a good balance in pricing?

Yes. Hey, Mark, it's Rakesh. I'll take that one again. Look, I think first of all, we're very happy with how pricing has improved over the last year. If you recall, when we ended 2023, our Americas core pricing multiple was 1.75. So, sitting here today at 2.1x, it really reflects the pricing taking into account the interest rate environment, along with the supply-demand dynamics. Look, as we think about where pricing is, we're continuously winning our fair share of deals, and we also lose deals. So, we know that the market is in equilibrium from that perspective. It also depends on what sellers are bringing to market and what their return thresholds are. So overall, Mark, there are a number of moving variables that would drive that purchase price multiple. But we're happy relative to where we were a year ago at the 2.1x. The other thing is we are working through a number of initiatives as well. Our goal is ultimately to pay the same dollars in investment, but extract more cash from our investments as we improve and optimize our processes and operations.

Understood and on that front, Vik, you talked about recalibrating your facility footprint. Could you repeat that or give me kind of what the strategy is? Are there going to be any expenses here in the near term as you go through that transition? And then any early thoughts on what that might save? Again, you mentioned three facilities. Is that, what's the facility count to and from?

We currently have around 1,200 collectors supporting our U.S. business, with approximately 300 located offshore and 900 in the U.S. The three facilities we discussed house about 50% of our U.S. collector base. Over the past several quarters, we have made progress in two key areas. First, our offshore collectors are meeting expectations, and second, we have significantly developed a functional work-from-home capability that is ready to implement. Unlike in the past, when closing a facility required letting go of all staff, we anticipate that many collectors from these facilities will continue to serve our U.S. customers remotely. As a result, we do not expect significant stranded costs or other impacts. The cost of exiting the two leases and one owned facility is relatively low.

Thank you for that. And then the $350 million loss, I think you said the fourth quarter purchases should be higher than third quarter. If you could say again, and I'm sorry I might have missed it kind of where that was coming from. I think you talked about, in the spot market having hit on a large deal or two, where's that fourth quarter strength from?

The fourth quarter, the U.S. business supply remains robust, but I feel as you know, we have a good forward view on that because most of the purchasing in the U.S. is forward flows. I think Rakesh’s commentary mentioned that Europe traditionally has had, if you go back and look over time, strong second quarters and strong fourth quarters, and we are seeing another strong fourth quarter building up in Europe. We're one month into the quarter; we have reasonable line of sight to what we already onboarded and the pipeline that's ahead of us. So we feel fairly confident at this point in time with the numbers that we put out there.

Thank you. Your next question is from Robert Dodd from Raymond James. Please go ahead with your question.

Congrats on the quarter. A question kind of follow-on. The guidance—and I realize it's early days and you haven't finalized everything yet—but at $1 billion purchasing volume for 2025, it looks like you're going to be pushing 1.4, I think you said, that's what shakes out for 2024 globally. And you talked about how the U.S. you expect it to remain elevated, and it's mostly forward flow. So, can you give us a couple of the push and pulls on like why you're only comfortable right now saying $1 billion for next year when the U.S. alone looks like it’s going to make up the vast majority of that and etc.? Why just the $1 billion right now in the preliminary guidance?

If you’ve sort of been tracking my commentary, Robert, over the last 18 months, while I'm pushing very hard in the business, I'm also very cognizant of not getting ahead of my skis on the stick, right? So, we set a $1 billion plus; we also indicated that we are in the process of working through what we would refer to as our planning cycle for next year. The European market, because it's so spot-driven, we want to be careful in our planning assumptions that we don't assume a level of spot buying that may or may not mature because it can lead us to make inappropriate strategic decisions. So, as we complete the year and have better line of sight to 2025, we will certainly update that. We wanted to signal that it's definitely looking at this point in time above a $1 billion. We wanted to signal that it's going to be somewhere between $1 billion and a little bit higher than that, but don't want to overcommit to the numbers for next year.

On the legal costs, obviously, I think up $8 million year-over-year, as you've invested more into that, and that will pay off next year, but how close are we to kind of a maturity level? Obviously, if you buy more, it'll go up more, but how close is the current run rate to where you think or the run rate you gave for Q4 to kind of what we should expect absent some huge statement or whatever?

Yes, I think we'll also—we haven't— we were very intentional in not providing, I think Rakesh was careful not to provide a legal cost number, going out into the future. If you think about the timelines that we laid out on that chart, if you see that the timeline for pre-judgment extends out over a very long timeline, 360 days plus minus. The larger volume that we've experienced over the last 12 months in purchasing is still going through the processes until it gets to post-judgment. When it gets to post-judgment, there will obviously be consequences and costs related to collectability at that point in time. So, I would say that year-on-year you would expect to see increases in legal costs. The size of those increases I think will be better able to tell you as we close the year and have a window probably in the mid to late February timeframe.

One more if I can. Given the cash flow you're generating, in my model at least, and you said on the call you expect to delever in ‘25. I think that's pretty realistic even if you do over $1 billion in purchasing. So—and this might be something you want to answer next quarter, but what are the capital use plans? Because I could see you taking your leverage down by the end of next year well below three. And so, what are the things under consideration if that were to occur?

Sorry, you were—just to make sure I understand the question. You're talking about the leverage being—your model would suggest that leverage would be trending down.

It's trending down pretty fairly materially across the course. I mean, that was what you're thinking across the course of 2025, well below 3, let's put it that way. So, what would the opportunities be? What would you be under consideration for utilizing that leverage capacity? I mean, obviously, more paper if it's there, but the $1 billion or $1.2 billion or whatever it is, leverage is still going to come down. So, in my model, I'll put words in here. So, what are the considerations that you're looking at for utilization of that capacity?

Yes, I think Robert, you answered the question when you said portfolio purchases, really that's what we are trying to calibrate. As Vik said, we didn't want to get over our skis. We put a $1 billion number up there. But look, I think we fully appreciate that our business is going to have its peaks and valleys, and we want to make sure that we are appropriately guarded against any changes in the environment as we move forward. So, in our case, from a leverage perspective, we are at that three and probably bumping up more as we purchase more in the next year. But ultimately, we want to be back in that sweet spot of 2x to 3x, and then we'll recalibrate again as we see portfolio investment opportunities come along. So that continues to be a priority. So, if your question is anything related to the stock and if we do something around dividends or buybacks, that is not a priority for us right now.

Thank you. There are no further questions at this time. I will now hand the call back to Vik Atal for the closing remarks.

Thank you everybody for joining us, and we really appreciate your support of our business through these times. Thank you.

Thank you. Ladies and gentlemen, the conference has now ended. Thank you all for joining. You may now disconnect your lines.