Q: Hi 5i team,
I'm confused about PRL's dividend sustainability due to negative free cash flow (−$57M in 2024 and −$3.7M in Q2 2025) and high leverage (112% D/E). Your March 2024 report assigned a B+ rating and positive outlook might be because of strong revenue growth (38.68%) and high ROI (30.33%), but didn’t address these cash flow issues. What am I missing? Is there something in their business model or cash flow timing that supports dividend sustainability?
Best,
Matt
I'm confused about PRL's dividend sustainability due to negative free cash flow (−$57M in 2024 and −$3.7M in Q2 2025) and high leverage (112% D/E). Your March 2024 report assigned a B+ rating and positive outlook might be because of strong revenue growth (38.68%) and high ROI (30.33%), but didn’t address these cash flow issues. What am I missing? Is there something in their business model or cash flow timing that supports dividend sustainability?
Best,
Matt
5i Research Answer:
Its cash flows are negative although the company is highly profitable. This is because there is a constant negative change in net operating assets, similar to GSY. This essentially represents the change in gross consumer loans receivable, which offsets positive cash flows. Viewing its cash from operations before net growth in gross consumer loans receivables' places it at $345M in operating cash for the last 12-months, more than enough for its $17M dividend payments.
Its debt to equity is high, and this is due to its business model, but when we look at its net debt/EBITDA, we are still quite comfortable with its 2.3X ratio.