Ann: CLH - 2018 AGM - Letter to Shareholders, page-39

A few points on the PDL revenues:
- 2015 was the highpoint because their PDL purchases dropped significantly in 2016 & 2017
- that under-investment in PDLs will have a lagging impact because ~40% of PDL revenues are from 1-2yr old PDLs, 20% from  3yr old PDLs and the rest of the revenues from older PDLs
- 2015 was also flattered by ~4m of upfront PDL sale (which again impacted the PDL revenues in subsequent years).....note that the Balbec deal will have a similar impact, but given they invested the funds almost immediately hopefully reduces this impact (and they mentioned that similar sales may become the norm, which may make the normal trend on PDL revenues quite volatile)
- the other major issue that is impacting PDL revenues is that they have kept on increasing the amortisation rate of PDLs : 43% in 2017, 46% in 2018 and 48% in 2019 (indicating perhaps the quality of the PDL book, or perhaps a more conservative approach.....reading the notes, they have to impair the PDL carrying value if unable to collect and given they have not done so and the auditors tested their model and again did not do anything, for the time being you have to believe it's a more conservative approach)
- Rivas IMO has also pivoted the business to Collection services which has an EBITDA margin of ~18% vs the PDL collections which has an EBITDA of ~41% so there is a gradual shift here which they are also trying to manage

So the issue of bigger asset & lower revenues.....IMO it's to do with the PDL book which is still recovering from a combination of lower purchases and lower profitability of PDL purchases in 2016 & 2017 (as  mentioned, 40% of those purchases would have been recognised in 1-2 yrs so that shortfall of 15-20m each year will have a lag impact). Also that is visible in the classification of the PDL carrying value on the balance sheet:
                                    2015          2016        2017       2018
Current PDLs               57m          61m         47m         53m
Non Current PDLs       199m        204m       236m       259m
Total PDLs                   256m        265m       284m       312m

IMO this shows the underinvestment in PDLs in 2016-2017 impacted the shorter term Current PDL carrying value and hopefully we will see an improvement in the next 12-24 months (albeit slightly suppressed given the increased amortisation rate). 

IMO Rivas has been doing quite a (good) balancing act in growing the Collections services business (lower margin), ramping up the PDL purchases (at challenging prices), making up for shortfall in PDL revenues (Balbec deal) and adjusting for the carrying value of the PDLs (increase amortisation rate) all the while trying to keep underlying EPS growing. 

Given a lot of this is dependent on bespoke valuation models and these are complex and opaque, it impossible to be 100% certain of the above, but the fact that Rivas is amortising at a higher rate to me seems to indicate he is not in it for the short term and hopefully that is good for long term holders.....

Anyway, DYOR & GLTAH