Encore Capital Group, Inc. (NASDAQ:ECPG) Q1 2023 Earnings Call Transcript

Encore Capital Group, Inc. (NASDAQ:ECPG) Q1 2023 Earnings Call Transcript May 3, 2023

Operator: Good day and thank you for standing by. Welcome to the Encore Capital Group Q1 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Bruce Thomas, VP of Global Investor Relations for Encore Capital Group. The floor is yours Mr. Thomas

Bruce Thomas: Thank you, operator. Good afternoon and welcome to Encore Capital Group’s first quarter 2023 earnings call. Joining me on the call today are Ashish Masih, our President and Chief Executive Officer; Jonathan Clark, Executive Vice President and Chief Financial Officer; and Ryan Bell, President of Midland Credit Management. Ashish and Jon will make prepared remarks today, and then we will be happy to take your questions. Unless otherwise noted, comparisons on this conference call will be made between the first quarter of 2023 and the first quarter of 2022. In addition, today’s discussion will include forward-looking statements subject to risks and uncertainties. Actual future results could differ materially from these forward-looking statements.

Please refer to our SEC filings for a detailed discussion of potential risks and uncertainties. During this call, we will use rounding and abbreviations for the sake of brevity. We will also be discussing non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures are included in our earnings presentation, which was filed on Form 8-K earlier today. As a reminder, this conference call will also be made available for replay on the Investors section of our website, where we will also post our prepared remarks following the conclusion of this call. With that, let me turn the call over to Ashish Masih, our President and Chief Executive Officer.

Ashish Masih: Thanks Bruce, and good afternoon, everyone. Thank you for joining us. Encore performance in the first quarter reflected normalized consumer behavior in each of our key markets. As such collections have returned to pre-pandemic levels for our MCM business in the U.S. and have stabilized for a Cabot business in Europe. At the same time, as anticipated, portfolio supply growth in the U.S. is accelerating with lending and charge off rates steadily growing. Consequently, MCM portfolio purchases in the U.S. in the first quarter were a record $213 billion more than twice the amount we purchased in Q1 a year ago. Due to increases in our collections from purchasing portfolio that attractive returns over the past few quarters, especially in the U.S., we are now seeing a turning point in our cash generation, which grew sequentially in the first quarter.

This is a trend we expect to continue. Earnings comparison to the year ago quarter are challenging due to the significant impact of collections over performance, and ERC forecast increases in the U.S. in the first quarter of 2022. As a result of the disciplined execution of our strategy, Encore is well-positioned with the operational capacity and balance sheet to capitalize on the growing portfolio purchasing opportunities in the market. We also remain as committed as ever to both the critical role we play in the consumer credit ecosystem, as well as the support we provide to consumers to regain their financial freedom, especially in this rising charge off rate environment. I believe it’s helpful to reiterate the critical role we play in the consumer credit ecosystem by assisting in the resolution of unpaid debts, which are an expected outcome of the lending business model.

Our mission is to help create pathways to economic freedom for the consumers we serve by helping them resolve their past few debts. We do that by engaging consumers and honest, empathetic and respectful conversations. Our business is to purchase portfolios of non-performing loans at attractive returns while minimizing funding costs. For each portfolio that we own, we strive to exceed our collection expectations, while both maintaining an efficient cost structure, as well as ensuring the highest level of compliance and consumer focus. We achieve these objectives through our three pillar strategy. The strategy enables us to consistently deliver outstanding financial performance and positions us well to capitalize on future opportunities. We believe this is instrumental in building long term shareholder value.

The first pillar of our strategy market focus concentrates our efforts on the markets where we can achieve the highest risk adjusted returns. Let’s now take a look at our two largest markets, beginning with the U.S. Changes to consumer behavior during the pandemic led to unusually low credit card balances and below average charge offs, which in turn resulted in a reduced level of portfolio sales by banks. However, since early 2021 outstandings have been rising, revolving credit in the U.S. suppressed pre-pandemic levels in early 2022. And each month thereafter, the U.S. Federal Reserve has reported a new record level of outstandings. Additionally, banks continue to report growth in lending in the first quarter financial results. In addition to the upward trend and credit card outstandings.

Credit card delinquency rates in the U.S. have continued to rise in recent quarters. This sustained increase in delinquency rates is now leading to higher charge offs, and increased supply of portfolios for debt buyers such as Encore. With lending by U.S. banks continuing to set new records with each passing month and charge off rates steadily rising we are seeing increases in volumes from under existing forward flow agreements, as well as significant additional volume being brought to market by banks and issuers. It’s clear that we have continued to transition into the portion of the consumer credit cycle in the U.S. in which portfolio purchasing becomes increasingly favorable in terms of both market supply and returns. MCM portfolio purchasing in Q1 of $213 million was more than twice the purchasing total for the same period last year and represents a record level of capital deployment for our U.S. business.

As market supply remains elevated in the U.S. we expect MCM’s portfolio purchases in Q2, 2023 to be at the similar level to our Q1 total. In addition, the purchasing pipeline for the remainder of 2023 remains robust with expected improvement in both volumes and returns. MCM collections in Q1 were $329 billion, which was in line with pre-pandemic collection levels, an indication that consumer behavior has largely normalized when compared to a year ago. As market supply growth accelerates in the U.S., MCM is focused on expanding collections capacity. Turning to our business in Europe. Cabot’s collections were $133 million in Q1, a decline of 10% as reported, due to the impact of foreign currency and lower portfolio purchases. In constant currency Cabot’s collections declined only 2% and remained broadly in line with our expectations.

The largest outlier on a competitive basis was in Spain, with collections was somewhat impacted by strikes in the Spanish court system. Overall, we are still not seeing any changes in consumer behavior due to macroeconomic headwinds. Cabot portfolio purchases in Q1 was $63 million. Importantly, we do not yet see the impact of higher funding costs from higher interest rates reflected in market portfolio pricing. As a result, we have remained disciplined in our approach to portfolio purchasing. As we have said in the past, ultimately, pricing will need to align with higher funding costs before we allocate additional capital toward growing and deployments in Europe. As outlined in our 2022 results, we reduced our headcount within Cabot during Q1 primarily in our support functions in order to manage our cost base.

These reductions resulted in a $6 million pre-tax charge in the quarter. We believe that our ability to generate significant cash provides us an important competitive advantage, which is a key component of the second pillar of our strategy. Now that many of the impacts of the pandemic are behind us, it’s instructive to look back and offer some perspective on the cause and effect relationships that affected our business performance. For example, in the U.S. the same atypical consumer behavior that drove reduced market supply in our industry, namely lower credit card balances and charge off rates also lead to higher collections for our business. When incremental cash generation from these higher collections began to subside, our cash generation came under pressure as the prolonged period of lower portfolio purchases, then led to reduced overall collections.

However, as expected, higher portfolio purchases at attractive returns in recent quarters have now reversed this trend and our cash generation and Q1 has begun to grow. We expect this trend to continue. Executing on our three pillar strategy ensures that the strength of a balance sheet is a constant priority. Over the past several years, our strong operating performance and focus capital deployment drove higher levels of cash generation and contributed to a lower level of debt, which reduced our leverage significantly over time. More recently, our leverage has risen, driven by both lower collections and increased portfolio purchasing over the last few quarters. When compared to the pre-pandemic years, Encore has become a much stronger company with lower leverage.

We now have a unified global funding structure that provides us with financial flexibility, diversified sources of financing, and extended maturities. Through our strong balance sheet, we remain well-positioned to fund the portfolio purchasing opportunities that lie ahead. I’d now like to hand over the call to Jon for a more detailed look at our financial results.

Jonathan Clark: Thank you Ashish. When comparing Q1 results to those from a year ago, keep in mind that the elevated level of collections last year was atypical and resulted in part from U.S. consumer behavior that has since normalized. In addition, in the first quarter of last year, our revenues and earnings benefited from $167 million of changes in recoveries. I’d also like to highlight a few other items that I believe are noteworthy. As we mentioned during our last earnings call, we reduced Cabot’s headcount during Q1 principally in support functions in order to manage our cost base. These reductions resulted in a $6 million pre-tax charge which reduced Q1, 2023 EPS by $0.19. Elsewhere, we continue to effectively manage our cost base as operating expenses remain well controlled despite inflationary pressures.

Collections in Q1 were approximately 3% lower than expected and resulted in $15 million of recoveries below forecast thus reducing Q1 EPS by $0.46. Changes in expected future recoveries totaling $6 million was a result of a very small increase in our existing global ERC less than 1% which increased Q1 EPS by $0.18. I’d like to emphasize that CECL accounting can cause significant fluctuations in quarterly reported results, but they do converge with cash results over the long term. This is yet another reason that we believe it’s important to take the long view of our financial metrics. This is consistent with the way we run the business and make decisions employing a long term perspective to building shareholder value. Portfolio purchasing in Q1 more than doubled in the U.S. compared to the first quarter last year as we have transitioned to a new phase of the credit cycle with increased purchasing.

This growth in purchasing is also reflected in their estimated remaining collections or ERC, which was flat compared to a year ago on a reported basis at $7.8 billion. However, ERC actually grew 2% in constant currency and is expected to grow from here. Collections were $462 million in Q1 down 11% compared to the atypically high collections level in the first quarter a year ago. Breaking that result down to two major businesses MCMs collections in the U.S. declined 11% compared to Q1 last year, primarily due to lower portfolio purchasing in recent years, and the normalization of consumer behavior. Cabot’s collections in the first quarter declined 10% as reported primarily due to the foreign currency effect of the weakening of the British Pound and Euro compared to a year ago.

In constant currency Cabot’s Q1 collections were down only 2%. For portfolios owned at the end of 2022 Encore’s global collections performance through the first quarter was of our year end portfolio ERC. For MCM and for Cabot collections through Q1 by the same measure were 95% and 98% respectively. For MCM, the collection shortfall in Q1 appears to be mainly a timing issue for recently acquired vintages as we transition back to more normalized collection patterns. For Cabot, collections were generally in line with expectations, though collections in Spain were somewhat impacted by strikes in the court system. With rising interest rates and challenging conditions in the bond market, we cannot overstate the importance of our global funding structure.

It provides us the financial horsepower, financial flexibility and diversified funding sources to approach the growing supply and environment from a position of strength. We believe our balance sheet also provides us very competitive funding costs when compared to our peers and competitors. In this environment, we believe higher financing costs are beginning to have a moderating effect on portfolio pricing in the U.S. as debt buyers adapt their bidding behaviors to their higher cost of capital. Having said that, we believe current pricing in Europe does not yet reflect this moderating effect, but we expect it will over time. With that, I’d like to turn it back over to Ashish.

Ashish Masih: Before I close, I’d like to remind everyone of our commitment to a consistent set of financial priorities that we established long ago. The importance of a strong diversified balance sheet in our industry cannot be overstated, especially as highly anticipated growth in market supply has arrived in the U.S. We will continue to be good stewards of your capital by always taking the long view and prioritizing portfolio purchases and attractive returns in order to build long term shareholder value. In the U.S. now that consumer behavior has normalized and portfolio supply growth is accelerating, it’s clear that we have transitioned to the next phase of the consumer credit cycle. As a result, more consumers than ever will need a support and we are ready to help them resolve their debts and restore the financial health consistent with our mission and the essential role we play in the consumer credit ecosystem.

A few quarters ago, we spoke about facing pressures on collections, revenues and earnings due to lower purchasing in recent years, and the normalization of consumer behavior. Our recent results have reflected these expected pressures. Now that our portfolio purchasing in the U.S. has turned the corner, and returns are improving we have begun to see these pressures subside on cash generation. The recovery of our U.S. market is evolving as we expect it. And we remain confident in our view of the business and are well-positioned to capitalize on this opportunity. Although the recovery of our business in the UK and Europe is unfolding more slowly, we remain confident that we are taking the right actions to best position our business for the opportunities that have come when the market becomes more constructive.

2023 has started off as a strong year for portfolio purchasing, driven by growth in the U.S. As we look ahead, we expect MCM portfolio purchases in Q2 will be similar to our Q1 total which was a quarterly record for our U.S. business. And we also see a robust pipeline for MCM in the second half of the year in both volumes and returns. And as I mentioned earlier, quarterly cash generation has grown sequentially in the first quarter, a trend we expect to continue. Now we’d be happy to answer any questions that you may have. Operator, please open up the lines for questions.

Q&A Session

Operator: Thank you. At this time, we will conduct the question-and answer-session. Our first speaker comes from the line of Mike Grondahl of Northland Securities. Your line is now open.

Mike Grondahl: Hey guys. I guess the first question for Ashish. Ashish back in August, you kind of said collections we’re normalizing, purchases are starting to ramp up. But that’s going to take a little bit of time. And you said there’d be a couple of weak quarters. You’ve had three weak quarters so far. Where are you kind of sitting today? Do you see another weak quarter too or I don’t know. How are you handicapping it today?

Ashish Masih: Mike, thanks for your question. You’re absolutely right. We started talking about this collections pressure back in August last year where we said compared to the pandemic years, our collections and revenues and earnings will be under pressure now, just to recap, that was from two reasons. One was due to lower purchasing for a long period of time as well as unusually high collections in the U.S. during that same pandemic period. And recent quarters have indeed reflected these pressures. But as I said in our remarks, a portfolio supply and U.S. has turned the corner and returns are improving. We set a quarterly record for us purchases. And we expect Q2 to be at a similar level. And so I do expect these pressures to start subsiding, have begun to subside in some ways.

For example, we highlighted a key metric, a turning point and a key metric of cash generation that grew sequentially and we expect it to continue. So over time, as purchasing continues at a higher level and at good returns these pressures will continue to subside. And I’m very confident and like the position where we stand today looking ahead.

Mike Grondahl: Got it. Got it. And maybe Jonathan, I think you said MCM had 96% of their expected year end collections in 1Q. And I think you said one of the reasons was MCM the timing of collections on some recently acquired portfolios. Could you just explain that a little bit?

Jonathan Clark: Okay, well, I’ll give you some clarity on the number then I’ll turn it over to Ashish to talk about our go forward at MCM. But the number I just want to ground you in what the number is the number is comparing which is something we do during the course of the year. We compare to our ERC as of yearend and that’s a good solid metric to go back and revisit every quarter. It’s your backbone, if you will, that you have going into the year. The first quarter, it was 96 on a combined basis, it was 95 for MCM and Cabot was higher, it was 98, I think. 98. And so I just wanted to make sure we grounded you on what that metric is, and then we come back and we revisited every quarter.

Ashish Masih: So if I could add to that. Thanks, John. So that was, as Jon mentioned, some level of timing in the recent vintages, the ’21 and ’22 vintages are the ones that face the most negative performance that we saw. And I would say in terms of timing, the point there is we are seeing a bit of lower cash from consumers in terms of the initial payment or the down payment if you would, and actually we’re seeing even better than expected payment plans set up. So we expect to get that cash over time, perhaps even more but for sure get that cash over time. So it’s just lower initial cash on some of those recent vintages and you can see those in our K and Q filing as well on ’21 and ’22 vintages.

Mike Grondahl: Got it. Okay. Thanks, guys.

Operator: Thank you. Our next question comes from the line of Mark Hughes of Truist Securities. Your line is now open.

Mark Hughes: Thanks. Good afternoon.

Ashish Masih: Hello, Mark.

Mark Hughes: Jonathan, I thought I heard first time around MCM was 98 and Cabot was 95.

Jonathan Clark: No, no. You wrote down wrong, I think. The combined was 96. MCM was 95 and Cabot was 98.

Mark Hughes: Okay. All right. Very good. The availability under your credit facility, what is that total at quarter end?

Jonathan Clark: $388 million. And we also have $100 million. I’m sorry, we have a $140 million on cash as well.

Mark Hughes: Yes. That’d be my question.

Jonathan Clark: I anticipated that question.

Mark Hughes: How did you find tax season? I think I saw the tax receipts or refunds were down maybe 10% or something like that in the first quarter. What was your experience?

Ashish Masih: Yes. In the US kind of not seeing any different behavior regarding tax from consumers. We do track refund rates very, very closely in our operations. But we’re not seeing any kind of impact that we can attribute to taxes. Now overall, consumer behavior, as I just mentioned, is seeing a bit less cash upfront and more willingness to set up payment plans which tend to hold pretty well over time. So that’s what we’re seeing currently on the tax front and U.S. consumer front.

Mark Hughes: Okay, and then do you have the collections multiples. I didn’t say that the Q was out for us have paper than Cabot that 2023 paper?

Ashish Masih: Yes. So for 2023 U.S. multiple is 2.2 and Cabot multiple is 1.7.

Mark Hughes: Okay. And then Jonathan. Interest expense, I think maybe about a quarter of your debt is floating with the Feds up to these days. What do you think it looks like in Q2?

Jonathan Clark: Yes, I think as I would stick by our mid 40s indicator we gave last quarter. I think there’s probably a reasonably good number as you know, Mark and environment like that I guess I’m supposed to say subject to, subject to, subject to but if everything was at a constant rate that would be reasonable assumption.

Mark Hughes: Yes. Ashish you mentioned additional volume from banks and issuers in addition to higher order flow activity. I guess one ideas the pressure on banks might lead them to sell paper a little more quickly in order to raise capital. Is that? Does that jive with your experience? Are you hearing anything like that?

Ashish Masih: Mark. No, we’re not hearing any talk around that being a driver. So what we are clearly seeing for several months now is just to drivers. Lending has grown a lot, these banks and credit card issuers have lent a lot. And as those vintages season delinquencies, and charge off rates are rising. So combined the two, we’re seeing both flows being higher level than before and more due coming to market from the same issuer, and actually, some new issuers, consumer lenders, FinTech type of players. So that’s what we are seeing. We have not heard any reason around the recent banking situation driving them to sell more. At least from the credit card players that we deal with, we have not felt any of that. Perhaps that becomes a driver in the future for some but nothing so far. It’s just happening in due course of the consumer credit cycle that we’re seeing is accelerating in some ways, the supply increase for our industry.

Mark Hughes: Yes. And one more, if I might, you’re still well, within your leverage target but it’s been moving up a bit here. If things continue to move in the right direction in terms of supply. Is there a thought to maybe tempering your appetite here in the near term and perhaps being a little more measured not that you’re not being measured, but maybe thinking about delaying some purchases until later?

Jonathan Clark: Yes. Mark, it’s a perfectly valid question. Just to start off, we take our leverage very seriously. And so as you know we’ve told people our target is two to three times. And some of the explanation, I think it’s worth saying is give me a little bit of color, the explanation of the growth and leverage, right, because it could be easy to come to a misperception of what’s driving it. We haven’t been buying much in the way of charge off receivables until recently. And as a result, our as you’ve heard, Ashish said a number of times our collections and therefore, our adjusted EBITDA have been under pressure, right. And second, our debt naturally does go up when you think about the cycles here are our debt naturally does go up as we’re, it’s good news, where we have more to buy, and it happens to be front end loaded.

And then as the cash flows come from those purchases, and we’re buying at very attractive multiples. It works to give you stronger and stronger leverage metrics. So I just want explain a little bit about the dynamics and I don’t want anyone to just extrapolate from recent trajectory and come to the conclusion that we’re just going to soar through our levels, but we will be managing as necessary as best we can to stay within our target range because we take our, as you know, we take our balance sheet and our rating very seriously.

Mark Hughes: Yes. I know the portfolio is starting to throw off cash pretty quickly. And so they certainly give you the ability to buy paper now and later, but I wanted to get your perspective on that. So thank you. That’s good for me.

Ashish Masih: Thanks Mark.

Operator: Thank you. Please stand by for our next question. Thank you. Our next question comes from the line of David Scharf of JMP Securities. Your line is now open.

David Scharf: Good afternoon. Thanks for taking my questions. First one, Ashish I guess this may be a softball question, but just wanted to make sure setting aside for the time being accounting or sort of orders of magnitude. In a very high level, is there any new message from you on this call versus the one we were on two months ago?

Ashish Masih: Yes. I would say kind of it, it consistent as we’ve kind of built up our message. But now, for sure in U.S. we are seeing an acceleration in supply compared to the last quarter, I mean, that we had signaled what we were going to purchase in Q1 we are seeing continued flows, increase in size, continued use coming to market. And now we see after Q1 results of the banks and insurers with delinquencies and charge off rates rising, as you’ve shown in the charts we share today as well. I would say the different messages, the supply increases, accelerating and it’s real. And in the last couple of months, I would say we also saw price improvement, or rather price decrease in the U.S. market. Now it’s early and you may not see that reflected in Q1, ’23 because those are result of flows signed previously.

And over time, as those flows run off, and the new ones take hold. And if there’s more pricing improvement, which normally should happen when supply rises, you should see better multiples being booked through the year. So that’s a new message that’s different. And we had anticipated it to some extent, but we are seeing it very real in very real situations now to the deals that are coming through.

David Scharf: Got it. That’s helpful color. I guess additionally I wanted to just get a better feel for what’s going on with the U.S. consumer in the sense that the anecdote you provided about the ’21 and ’22 vintages being timing related and specifically maybe lower upfront payments in more payment plans. I’m putting myself in the shoes of a debtor if I can’t make any payments, and somebody offers me a payment plan for a little bit. I mean, I can just see behaviorally, that’s not a good reflection of where the U.S. consumer is headed in. And obviously there have been recession signals going on for months now. Is that usually a leading indicator for you to get a lot more cautious on collection forecasts going forward when there seems to be more headwind on upfront payments, and more of a desire to accept extended payment plans? And I guess related to that does that, will that be reflected in, I guess perhaps lower yielding a little more cautious forecast going forward?

Ashish Masih: So there’s a few things you mentioned there. But you’re absolutely right, in terms of kind of trying to read the U.S. consumer, David. So what’s happening is it’s much more normalized. And if you go back to pre-pandemic levels, it’s much more in line with what we used to see. What we saw for a couple of years during pandemic when consumers save money or had support was unusually excess liquidity and a high cash payments, right. I mean, the savings rate has shot up. And now savings rates actually below pre-pandemic in some ways. So we are seeing much more normal behavior. But you’re absolutely right consumer is facing certain pressures. But they’re kind of not fully there yet as a recession word, because inflation is there, which is new, but unemployment rate is record low.

So all of those things combined are leading to much more for normal behavior at this time. But we will of course, be watching out for consumer behavior changes and adjusting our operations to make sure we are dealing with the consumers and addressing what their situations are now. For example, inflation is tamed down a bit and gas prices have reduced again. So that’s less of a conversation. But consumers are absolutely behaving more normally kind of usual consumers that we see given the recent charge off before the pandemic. So it’s kind of more normalized and I would say that whole excess liquidity that consumers had that is gone and we are back into the normal situation now.

David Scharf: Okay, got it. And then just a couple for Jonathan. First, as we think about kind of modeling labor costs, which I imagine are impacted by inflation as well. Salary and benefits it’s always the biggest line item obviously, I’ll call center employees. It went up 15% sequentially. And I don’t know if the restructuring or I don’t know if some of the headcount reductions in Europe severance hit that line item. But is there a level we ought to be thinking about quarterly this year? Because there’s a pretty big variance between kind of 90 million per quarter in the second half last year and 104-105 million in Q1?

Ashish Masih: Yes, I’ll take that in. And Jon can chime in. David, you’re absolutely right, the 6 million charge did hit the SMB line from in terms of sequential impact. And then you are right and sequential impact. I mean, some of those changes are there, we continue to watch them. But that’s the biggest one, I would say. The inflation is still there, although the effects of that we are managing through in terms of productivity, use of technology and the wage increases and whatnot, as well as some of the reductions. And it was not just reductions. What we didn’t talk about this time around is and we mentioned last time is we actually closed a number of open positions, equal number open positions, and we are managing that globally, to drive better productivity and performance.

So we continue to manage through that effect, I think pretty effectively. And we are doing those changes mostly in support functions, the reduction in Cabot and support functions primarily, to preserving our collections capacity and capability for the volume that will come in and ensuring our collections are not impacted.

David Scharf: Got it. That’s all I have. Thank you very much.

Ashish Masih: You’re welcome.

Operator: Thank you. Thank you. Our next question comes from the line of Robert Dodd of Raymond James. Your line is now open.

Robert Dodd: Hi, guys. Just going back to that headcount question if I can, I mean were the support reductions, were they focused in support for any particular geography or product? Or is there any areas that maybe that you’ve talked about the returns in Europe that just don’t look like they’re going to get more appealing or deteriorated? Is it or was it just kind of the same across the board reduction, but was there any particular area of focus to that charge and nationalization of headcount?

Ashish Masih: Robert, it was all in Europe, UK and continental Europe in support functions primarily. And it was a very thoughtful exercise that the team went through in terms of which teams there’s opportunity, which teams are doing certain functions that are critical. So and then also closing open requisitions, or open positions. So that exercise was across all countries in Europe and UK. So I wouldn’t say it’s regarding any particular sub market there. There’s no message that I would, that one should imply from that. But it was all in the UK and continental Europe. Now we continue to manage across other countries, including the U.S. and the headquarters and support functions here as well in terms of open position management and all that. But the reductions were all in Europe and UK.

Robert Dodd: Got it. Thank you. And then about the ’21, ’22 vintages in the U.S. if I can and I appreciate all the color you’ve given already. If you would look at what the mix of upfront versus payment plan or down payment so to speak versus payment plan was in, say 2017-2018 versus where it is now for those ’21-’22. Is it comparable to kind of historical norms or were you assuming already assuming normalization? And then it’s worse than that? Or is this some kind of is there an element of kind of mediate what does a join COVID default look like? And how should that be modeled into the curve if you can well formed question, but yes, any color there?

Ashish Masih: Yes, I mean, it’s kind of reverting to more normalized behavior. Again, if you try to find slides too much it kind of mirrors meaning but it is reverting to more normal behavior that we would see prior to the pandemic. Ryan any color you would add. Ryan’s here as well on that.

Ryan Bell: but it’s consistent with the pre-pandemic tranches. So 2017, 2018, 2019, we just saw an abundance of change in 2020 and ’21. And now it’s just reverting back to that normal behavior.

Robert Dodd: Got it. I appreciate that. Thank you.

Operator: Thank you. At this time, I would like to turn it back to Mr. Masih for any further comments.

Ashish Masih: Thank you. As we close the call today, I’d like to reiterate a couple of important points. As the consumer credit cycles and our key market each evolve in their own unique ways we continue our discipline purchasing approach by allocating capital to a market with the highest returns. And when combined with our effective collections operation, this approach has enabled us to begin to grow our cash generation once again. This is the portion of the credit cycle we have been anticipating. We are also as committed as ever to the essential role we play in the credit ecosystem and to help consumers regain their financial freedom. Thanks for taking the time to join us. And we look forward to providing a second quarter 2023 results in August.

Operator: Thank you for your participation in today’s conference. This does conclude the program. You may now disconnect.