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PRA Group Reports Third Quarter 2014 Results

NORFOLK, Va., Nov. 10, 2014 -- PRA Group (Nasdaq:PRAA), a world leader in acquiring non-performing consumer debt, today reported its financial results for the third quarter 2014. These results include the effect of the Company's Aktiv Kapital acquisition since the transaction closed on July 16, 2014.

Third Quarter Highlights

  • Cash collections of $372.7 million, up 28% from the third quarter of 2013.
  • Revenues of $239.0 million, up 21%.
  • Net income of $51.2 million, up 8%.
  • $1.01 diluted earnings per share, compared with $0.93 in the year-ago quarter, up 9%. The company incurred non-recurring expenses of $0.08 per diluted share in connection with its Aktiv Kapital acquisition and $0.03 per diluted share in foreign exchange currency losses specifically related to foreign currency forward contracts associated with the acquisition. Excluding these expenses, earnings per diluted share would have been $1.12, up 20%. A reconciliation of this non-GAAP financial measure to GAAP is included at the end of this press release.
  • 21.1% return on average equity, annualized. Excluding the non-recurring expenses related to the Aktiv Kapital acquisition and the foreign exchange currency loss, annualized return on average equity would have been 23.2%.
  • $891.4 million in portfolio acquisitions.

"PRA Group now offers global clients a compliant partner focused on a positive customer experience with the financial capacity to offer maximum value, purchasing consistency and post-sale support," said Steve Fredrickson, chairman, president and chief executive officer, PRA Group. "As I continue to meet with employees, clients, and service providers across Europe, I have found that the acquisition of Aktiv Kapital and integration are being met positively by all. The magnitude of our opportunity in Europe continues to impress me and by acquiring a pan-European leader, we are well positioned to capitalize on it." 

REVENUES

  • Revenues of $239.0 million in the third quarter, largely driven by cash collections, included finance receivables income net of principal amortization and net allowance reversals. Net finance receivables income was $224.3 million, up 31% from $171.5 million in the year-ago quarter.  
  • Cash collections increased 28% in the third quarter from the year-ago quarter to $372.7 million, and included collections from these finance receivables sources:
           
Cash Collection Source ($ in thousands) Q32014 Q22014 Q12014 Q42013 Q32013
Call Center and Other Collections  $ 97,301  $ 95,072  $ 97,736  $ 84,375  $ 89,512
External Legal Collections  49,930  55,011  50,990  46,066  48,274
Internal Legal Collections  41,400  45,090  43,939  34,101  33,288
Insolvency Collections  110,544  124,101  120,702  114,384  120,577
Legacy Aktiv Kapital  73,568  --   --   --   -- 
Total Cash Collections  $ 372,743  $ 319,274  $ 313,367  $ 278,926  $ 291,651
           
  • Principal amortization of finance receivables in the third quarter was $148.4 million or 39.8% of cash collections, compared with 41.2% in the year-ago quarter. Principal amortization included a net allowance reversal of $1.7 million recorded against certain pools of finance receivables in the quarter, compared with a net allowance reversal of $2.6 million recorded in the year-ago quarter.     
  • Revenues in the third quarter also included income from PRA Group's fee-based businesses of $12.9 million, compared with $26.3 million in the year-ago quarter. The decline was primarily due to sizeable fee income from the Claims Compensation Bureau business during the third quarter of 2013. 

EXPENSES AND OPERATING INCOME

  • Operating expenses were $150.8 million in the third quarter of 2014, compared with $118.3 million a year ago, an increase of 27%.  PRA Group incurred approximately $5.9 million of non-recurring expenses during the quarter related to its acquisition of Aktiv Kapital.      
  • The Company also incurred $2.0 million in foreign exchange currency losses related to the acquisition of Aktiv Kapital that are included on the income statement below the operating expense line. 
  • Operating income was $88.2 million, compared with $79.5 million in the year-ago quarter.  The operating margin was 36.9% in the third quarter of 2014.
  • The provision for income taxes was $28.5 million in the third quarter, up 8% from the year-ago quarter. PRA Group's provision for income taxes was 35.8% of income before taxes in the third quarter, compared with 34.8% in the year-ago quarter. 

PORTFOLIO ACQUISITIONS

  • PRA Group invested $891.4 million in new finance receivables from North American and European creditors in the third quarter of 2014, including $728 million in finance receivables from the acquisition of Aktiv Kapital, compared with $141.9 million in the year-ago quarter.
           
Portfolio Purchase Source ($ in thousands) Q32014 Q22014 Q12014 Q42013 Q32013
Core Customer Debt  $ 852,821  $ 93,025  $ 80,711  $ 67,522  $ 100,081
Insolvency Claims  38,535  16,187  72,003  31,987  41,794
Total Portfolio Purchases  $ 891,356  $ 109,212  $ 152,714  $ 99,509  $ 141,875
           

BALANCE SHEET

  • Borrowings totaled $1,425.4 million at September 30, 2014, and consisted of $436.5 million drawn on the domestic revolver, $371.7 million in assumed debt from the acquisition of Aktiv Kapital, $259.8 million in convertible senior notes, $187.5 million in other long-term debt and $169.9 million in seller financing related to the purchase of Aktiv Kapital. Total borrowings were $452.2 million at September 30, 2013. 
  • Cash and cash equivalents were $70.3 million at September 30, 2014, compared with $108.7 million at September 30, 2013. 
  • Net deferred tax liabilities were $237.2 million at September 30, 2014, compared with $200.1 million a year ago. 
  • Stockholders' equity increased to $959.9 million at September 30, 2014, from $816.6 million at September 30, 2013.   

Conference Call Information

PRA Group will hold a conference call today at 5:00 p.m. ET to discuss results with institutional investors and stock analysts. To listen to a webcast of the call, visit http://ir.pragroup.com/events.cfmuntil February 10, 2015.   To listen by phone, call 888-695-7639 in the U.S. or 970-315-0482 outside the U.S. The conference ID is 17664211. A question-and-answer session on the call will be open only to analysts or investors. To listen to a replay of the call until November 17, 2014, call 855-859-2056 in the U.S. or 404-537-3406 outside the U.S. and use conference ID 17664211.                        

About PRA Group

PRA Group (Nasdaq:PRAA), a world leader in acquiring non-performing consumer debt, returns capital to global banks and other creditors to help expand financial services for consumers in North America and Europe. PRA Group companies collaborate with customers to help them resolve their debt and also provide a broad range of revenue and recovery services to business and government clients.

PRA has been recognized as one of Fortune's 100 Fastest-Growing Companies for the past three years and one of Forbes' Best Small Companies in America every year since 2007. For more information, please visit www.PRAgroup.com.

About Forward-Looking Statements

Statements made herein which are not historical in nature, including PRA Group's or its management's intentions, hopes, beliefs, expectations, representations, projections, plans or predictions of the future, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.

The forward-looking statements in this press release are based upon management's current beliefs, estimates, assumptions and expectations of PRA Group's future operations and economic performance, taking into account currently available information. These statements are not statements of historical fact or guarantees of future performance, and there can be no assurance that anticipated events will transpire or that our expectations will prove to be correct. Forward-looking statements involve risks and uncertainties, some of which are not currently known to PRA Group. Actual events or results may differ materially from those expressed or implied in any such forward-looking statements as a result of various factors, including risk factors and other risks that are described from time to time in PRA Group's filings with the Securities and Exchange Commissionincluding but not limited to PRA Group's annual reports on Form 10-K, its quarterly reports on Form 10-Q and its current reports on Form 8-K, filed with the Securities and Exchange Commission and available through PRA Group's website, which contain detailed discussion of PRA Group's business, including risks and uncertainties that may affect future results.

Due to such uncertainties and risks, you are cautioned not to place undue reliance on such forward-looking statements, which speak only as of today. Information in this press release may be superseded by recent information or statements, which may be disclosed in later press releases, subsequent filings with the Securities and Exchange Commission or otherwise. Except as required by law, PRA assumes no obligation to publicly update or revise its forward-looking statements contained herein to reflect any change in PRA Group's expectations with regard thereto or to reflect any change in events, conditions or circumstances on which any such forward-looking statements are based, in whole or in part.

 
PRA Group, Inc.
Unaudited Consolidated Income Statements
(in thousands, except per share amounts)
         
         
         
  Three Months Ended September 30, Nine Months Ended September 30,
  2014 2013 2014 2013
         
Revenues:        
Income recognized on finance receivables, net $ 224,326 $ 171,456 $ 584,814 $ 494,818
Fee income 12,882 26,306 43,659 55,464
Other revenue 1,765 -- 1,765 --
Total revenues 238,973 197,762 630,238 550,282
         
Operating expenses:        
Compensation and employee services 65,237 52,882 169,083 146,081
Legal collection fees 13,778 10,206 35,982 31,343
Legal collection costs 20,367 19,801 72,329 63,020
Agency fees 5,988 1,404 8,902 4,293
Outside fees and services 17,221 8,707 40,125 24,789
Communications 8,907 6,645 26,019 21,398
Rent and occupancy 3,018 1,950 7,384 5,462
Depreciation and amortization 4,949 3,753 13,107 10,653
Other operating expenses 11,311 6,549 25,068 17,665
Impairment of goodwill -- 6,397 -- 6,397
Total operating expenses 150,776 118,294 397,999 331,101
Income from operations 88,197 79,468 232,239 219,181
         
Other income and (expense):        
Interest income -- -- 2 --
Interest expense (11,808) (3,995) (21,736) (9,607)
Foreign exchange gain/(loss) 3,251 -- (2,961) --
Income before income taxes 79,640 75,473 207,544 209,574
Provision for income taxes 28,473 26,262 78,030 78,432
Net income $ 51,167 $ 49,211 $ 129,514 $ 131,142
Adjustment for net income attributable to redeemable noncontrolling interest -- 1,873 -- 1,605
Net income attributable to PRA Group, Inc. $ 51,167 $ 47,338 $ 129,514 $ 129,537
         
Net income per common share attributable to PRA Group, Inc.:      
Basic  $ 1.02  $ 0.94  $ 2.59  $ 2.56
Diluted  $ 1.01  $ 0.93  $ 2.57  $ 2.54
         
Weighted average number of shares outstanding:        
Basic 50,075 50,154 50,023 50,571
Diluted 50,439 50,660 50,413 51,039
 
 
PRA Group, Inc.
Unaudited Consolidated Balance Sheets
(in thousands, except per share amounts)
     
  September 30, December 31,
ASSETS 2014 2013
     
Cash and cash equivalents $ 70,300 $ 162,004
Finance receivables, net 1,913,710 1,239,191
Other receivables, net 18,217 12,359
Income taxes receivable 11,506 11,710
Net deferred tax asset 4,639 1,361
Property and equipment, net 45,969 31,541
Goodwill 594,401 103,843
Intangible assets, net 12,315 15,767
Other assets 86,372 23,456
Total assets $ 2,757,429 $ 1,601,232
     
LIABILITIES AND EQUITY    
     
Liabilities:    
Accounts payable $ 15,352 $ 14,819
Accrued expenses and other liabilities 65,294 27,655
Income taxes payable 5,547 --
Accrued compensation 21,466 27,431
Net deferred tax liability 237,201 210,071
Interest bearing deposits 27,300 --
Borrowings 1,425,409 451,780
Total liabilities 1,797,569 731,756
Stockholders' equity:    
Preferred stock, par value $0.01, authorized shares, 2,000, issued and outstanding shares - 0 -- --
Common stock, par value $0.01, 100,000 authorized shares, 50,077 issued and outstanding shares at September 30, 2014, and 49,840 issued and outstanding shares at December 31, 2013 501 498
Additional paid-in capital 141,490 135,441
Retained earnings 859,019 729,505
Accumulated other comprehensive (loss)/income (41,150) 4,032
Total stockholders' equity 959,860 869,476
Total liabilities and equity $ 2,757,429 $ 1,601,232
 
PRA Group, Inc.
Unaudited Consolidated Statements of Cash Flows
(in thousands)
     
     
     
  Nine Months Ended September 30,
  2014 2013
Cash flows from operating activities:    
 Net income $ 129,514 $ 131,142
 Adjustments to reconcile net income to net cash provided by operating activities:    
 Amortization of share-based compensation 9,456 10,209
 Depreciation and amortization 13,107 10,653
 Impairment of goodwill -- 6,397
 Amortization of debt discount 3,027 525
 Amortization of debt fair value (3,595) --
 Deferred tax expense 31,055 2,359
 Changes in operating assets and liabilities:    
 Other assets 1,622 (1,147)
 Other receivables 4,225 (1,497)
 Accounts payable (16,507) 2,237
 Income tax receivable/payable, net (111) (5,062)
 Accrued expenses 11,205 8,604
 Accrued compensation (13,504) 7,660
     
Net cash provided by operating activities 169,494 172,080
     
Cash flows from investing activities:    
Purchases of property and equipment (16,513) (9,913)
Acquisition of finance receivables, net of buybacks (412,740) (546,201)
Collections applied to principal on finance receivables 420,570 368,693
Business acquisition, net of cash acquired (851,183) --
     
Net cash used in investing activities (859,866) (187,421)
     
Cash flows from financing activities:    
Income tax benefit from share-based compensation 4,159 2,742
Proceeds from lines of credit 485,000 217,000
Principal payments on lines of credit (48,500) (344,000)
Repurchases of common stock -- (58,511)
Cash paid for purchase of portion of noncontrolling interest -- (1,150)
Distributions paid to noncontrolling interest -- (51)
Principal payments on long-term debt (7,500) (4,109)
Proceeds from long-term debt 169,938 --
Net increase in interest bearing deposits 51 --
Proceeds from convertible debt, net -- 279,285
     
Net cash provided by financing activities 603,148 91,206
     
Effect of exchange rate on cash (4,480) 153
     
Net (decrease)/increase in cash and cash equivalents (91,704) 76,018
     
Cash and cash equivalents, beginning of period 162,004 32,687
     
Cash and cash equivalents, end of period $ 70,300 $ 108,705
     
Supplemental disclosure of cash flow information:    
Cash paid for interest  $ 21,097 $ 9,333
Cash paid for income taxes  41,682  78,434
     
Supplemental disclosure of non-cash information:    
Adjustment of the redeemable noncontrolling interest measurement amount $ -- $ 393
Distributions payable relating to noncontrolling interest  --   1,237
Purchase of redeemable noncontrolling interest  --   9,162
Employee stock relinquished for payment of taxes  (7,563)  (4,103)
 
FINANCIAL HIGHLIGHTS
  As of and for the  As of and for the 
  Three Months Ended September 30, Nine Months Ended September 30,
  2014 2013 Change 2014 2013 Change
EARNINGS (in thousands)            
Income recognized on finance receivables, net  $ 224,326  $ 171,456 31%  $ 584,814  $ 494,818 18%
Fee income  12,882  26,306 -51%  43,659  55,464 -21%
Total revenues  238,973  197,762 21%  630,238  550,282 15%
Operating expenses  150,776  118,294 27%  397,999  331,101 20%
Income from operations  88,197  79,468 11%  232,239  219,181 6%
Net interest expense  11,808  3,995 196%  21,734  9,607 126%
Net income  51,167  49,211 4%  129,514  131,142 -1%
Net income attributable to PRA Group, Inc.  51,167  47,338 8%  129,514  129,537 0%
PERIOD-END BALANCES (in thousands)            
Cash and cash equivalents  $ 70,300  $ 108,705 -35%  $ 70,300  $ 108,705 -35%
Finance receivables, net  1,913,710  1,256,822 52%  1,913,710  1,256,822 52%
Goodwill and intangible assets, net  606,716  119,636 407%  606,716  119,636 407%
Total assets  2,757,429  1,547,985 78%  2,757,429  1,547,985 78%
Borrowings  1,425,409  452,229 215%  1,425,409  452,229 215%
Total liabilities  1,797,569  721,001 149%  1,797,569  721,001 149%
Total equity  959,860  816,647 18%  959,860  816,647 18%
FINANCE RECEIVABLE INCOME (dollars in thousands)            
Cash collections  $ 372,743  $ 291,651 28%  $ 1,005,384  $ 863,511 16%
Cash collections on fully amortized pools  17,105  8,762 95%  50,564  25,719 97%
Principal amortization without allowance (reversals)/charges  150,115  122,776 22%  426,520  370,286 15%
Allowance (reversal)/charge  (1,698)  (2,581) -34%  (5,950)  (1,593) 274%
Principal amortization with allowance (reversals)/charges  148,417  120,195 23%  420,570  368,693 14%
Principal amortization w/ allowance charges as % of cash collections:            
Including fully amortized pools 39.8% 41.2% -3% 41.8% 42.7% -2%
Excluding fully amortized pools 41.7% 42.5% -2% 44.0% 44.0% 0%
Allowance (reversal)/charge to period-end net finance receivables (0.1%) (0.2%) -57% (0.3%) (0.1%) 145%
PURCHASES OF FINANCE RECEIVABLES (dollars in thousands)            
Purchase price - North America core  $ 91,537  $ 89,044 3%  $ 262,526  $ 329,309 -20%
Purchase price - North America insolvency  38,535  41,794 -8%  126,725  210,662 -40%
Purchase price - Europe core  761,284  11,037 6798%  764,031  17,305 4315%
Purchase price - total  891,356  141,875 528%  1,153,282  557,275 107%
Number of portfolios - total 125 79 58% 314 264 19%
ESTIMATED REMAINING COLLECTIONS (in thousands)            
Estimated remaining collections - North America core  $ 2,089,253  $ 1,762,369 19%  $ 2,089,253  $ 1,762,369 19%
Estimated remaining collections - North America insolvency  697,662  877,722 -21%  697,662  877,722 -21%
Estimated remaining collections - Europe core  1,582,135  32,272 4803%  1,582,135  32,272 4803%
Estimated remaining collections - total  4,369,050  2,672,363 63%  4,369,050  2,672,363 63%
SHARE DATA (share amounts in thousands)            
Net income per common share - diluted  $ 1.01  $ 0.93 9%  $ 2.57  $ 2.54 1%
Weighted average number of shares outstanding - diluted  50,439  50,660 0%  50,413  51,039 -1%
Shares repurchased  --  989 -100%  --  1,203 -100%
Average price paid per share repurchased (including acquisitions costs)  $ --   $ 50.55 -100%  $ --   $ 48.62 -100%
Closing market price  $ 52.23  $ 59.93 -13%  $ 52.23  $ 59.93 -13%
RATIOS AND OTHER DATA (dollars in thousands)            
Return on average equity (1) 21.1% 23.5% -10% 18.5% 22.4% -17%
Return on revenue (2) 21.4% 24.9% -14% 20.6% 23.8% -14%
Return on average assets (3) 7.3% 12.5% -42% 8.5% 12.0% -29%
Operating margin (4) 36.9% 40.2% -8% 36.8% 39.8% -7%
Operating expense to cash receipts (5) 39.1% 37.2% 5% 37.9% 36.0% 5%
Debt to equity (6) 148.5% 55.4% 168% 148.5% 55.4% 168%
Number of full-time equivalent collectors 2,498 2,054 22% 2,498 2,054 22%
Number of full-time equivalent employees 3,913 3,223 21% 3,913 3,223 21%
Cash receipts (5)  $ 385,625  $ 317,957 21%  $ 1,049,043  $ 918,975 14%
Line of credit - unused portion at period end  513,800  435,500 18%  513,800  435,500 18%
(1) Calculated as annualized net income divided by average equity for the period
(2) Calculated as net income divided by total revenues
(3) Calculated as annualized net income divided by average assets for the period
(4) Calculated as income from operations divided by total revenues
(5) "Cash receipts" is defined as cash collections plus fee income
(6) For purposes of this ratio, "debt" equals borrowings
 
FINANCIAL HIGHLIGHTS
  For the Quarter Ended
  September 30 June 30 March 31 December 31 September 30
  2014 2014 2014 2013 2013
EARNINGS (in thousands)          
Income recognized on finance receivables, net  $ 224,326  $ 182,518  $ 177,970  $ 168,728  $ 171,456
Fee income  12,882  14,825  15,952  16,125  26,306
Total revenues  238,973  197,343  193,922  184,853  197,762
Operating expenses  150,776  124,891  122,332  106,503  118,294
Income from operations  88,197  72,452  71,590  78,350  79,468
Net interest expense  11,808  5,067  4,859  4,860  3,995
Net income  51,167  37,507  40,840  45,777  49,211
Net income attributable to PRA Group, Inc.  51,167  37,507  40,840  45,777  47,338
PERIOD-END BALANCES (in thousands)          
Cash and cash equivalents  $ 70,300  $ 270,526  $ 191,819  $ 162,004  $ 108,705
Finance receivables, net  1,913,710  1,219,595  1,253,961  1,239,191  1,256,822
Goodwill and intangible assets, net  606,716  118,927  118,800  119,610  119,636
Total assets  2,757,429  1,695,362  1,642,613  1,601,232  1,547,985
Borrowings  1,425,409  448,785  450,278  451,780  452,229
Total liabilities  1,797,569  743,106  732,395  731,756  721,001
Total equity  959,860  952,256  910,218  869,476  816,647
FINANCE RECEIVABLE COLLECTIONS (dollars in thousands)          
Cash collections  $ 372,743  $ 319,274  $ 313,367  $ 278,926  $ 291,651
Cash collections on fully amortized pools  17,105  16,943  16,516  9,801  8,762
Principal amortization without allowance (reversals)/charges  150,115  139,055  137,350  110,626  122,776
Allowance (reversal)/charge  (1,698)  (2,299)  (1,953)  (429)  (2,581)
Principal amortization with allowance (reversals)/charges  148,417  136,756  135,397  110,197  120,195
Principal amortization w/ allowance charges as % of cash collections:          
Including fully amortized pools 39.8% 42.8% 43.2% 39.5% 41.2%
Excluding fully amortized pools 41.7% 45.2% 45.6% 40.9% 42.5%
Allowance (reversal)/charge to period-end net finance receivables -0.1% -0.2% -0.2% 0.0% -0.2%
PURCHASES OF FINANCE RECEIVABLES (dollars in thousands)          
Purchase price - North America core  $ 91,537  $ 91,904  $ 79,085  $ 65,759  $ 89,044
Purchase price - North America insolvency  38,535  16,187  72,003  31,987  41,794
Purchase price - Europe core  761,284  1,121  1,626  1,763  11,037
Purchase price - total  891,356  109,212  152,714  99,509  141,875
Number of portfolios - total 125 85 104 83 79
ESTIMATED REMAINING COLLECTIONS (in thousands)          
Estimated remaining collections - North America core  $ 2,089,253  $ 1,948,414  $ 1,891,511  $ 1,824,132  $ 1,762,369
Estimated remaining collections - North America insolvency  697,662  733,176  793,855  822,988  877,722
Estimated remaining collections - Europe core  1,582,135  20,349  19,358  22,150  32,272
Estimated remaining collections - total  4,369,050  2,701,939  2,704,724  2,669,270  2,672,363
SHARE DATA-ADJUSTED (7) (share amounts in thousands)          
Net income per common share - diluted  $ 1.01  $ 0.74  $ 0.81  $ 0.91  $ 0.93
Weighted average number of shares outstanding - diluted  50,439  50,437  50,363  50,375  50,660
Shares repurchased  --  --  --  --  989
Average price paid per share repurchased (including acquisitions costs)  $ --   $ --   $ --   $ --   $ 50.55
Closing market price  $ 52.23  $ 59.53  $ 57.86  $ 52.84  $ 59.93
RATIOS AND OTHER DATA (dollars in thousands)          
Return on average equity (1) 21.1% 16.0% 18.2% 21.5% 23.5%
Return on revenue (2) 21.4% 19.0% 21.1% 24.8% 24.9%
Return on average assets (3) 7.3% 9.0% 10.0% 11.5% 12.5%
Operating margin (4) 36.9% 36.7% 36.9% 42.4% 40.2%
Operating expense to cash receipts (5) 39.1% 37.4% 37.1% 36.1% 37.2%
Debt to equity (6) 148.5% 47.1% 49.5% 52.0% 55.4%
Number of collectors 2,498 2,258 2,379 2,313 2,054
Number of full-time equivalent employees 3,913 3,567 3,621 3,543 3,223
Cash receipts (5)  $ 385,625  $ 334,099  $ 329,319  $ 295,051  $ 317,957
Line of credit - unused portion at period end  513,800  650,000  435,500  435,500  435,500
(1) Calculated as annualized net income divided by average equity for the period
(2) Calculated as net income divided by total revenues
(3) Calculated as annualized net income divided by average assets for the period
(4) Calculated as income from operations divided by total revenues
(5) "Cash receipts" is defined as cash collections plus fee income
(6) For purposes of this ratio, "debt" equals borrowings
 
Summary Portfolio Data at September 30, 2014, Entire Domestic Portfolio
($ in thousands)
        Actual Cash    
    Total Net Finance Collections Estimated Total Estimated
Purchase Purchase Estimated Receivables Including Cash Remaining  Collections to
Period Price Collections Balance Sales Collections Purchase Price
1996  $ 3,080  $ 10,224  $ --   $ 10,216  $ 8 332%
1997  7,685  25,587  --   25,545  42 333%
1998  11,089  37,556  --   37,449  107 339%
1999  18,898  69,761  --   69,548  213 369%
2000  25,020  118,391  --   117,310  1,081 473%
2001  33,481  178,991  --   177,173  1,818 535%
2002  42,325  204,141  --   200,602  3,539 482%
2003  61,447  273,534  --   268,441  5,093 445%
2004  59,176  205,802  --   200,901  4,901 348%
2005  143,166  333,216  5,993  316,453  16,763 233%
2006  107,666  227,350  6,539  213,147  14,203 211%
2007  258,363  546,218  18,235  494,865  51,353 211%
2008  275,110  538,083  20,690  492,107  45,976 196%
2009  281,322  926,638  12,652  822,517  104,121 329%
2010  357,753  1,078,653  45,823  866,812  211,841 302%
2011  392,759  1,040,740  107,758  705,102  335,638 265%
2012  508,261  1,041,273  241,840  540,178  501,095 205%
2013  620,906  1,222,177  410,745  407,264  814,913 197%
2014  382,835  669,849  346,946  67,335  602,514 175%
Total  $ 3,590,342  $ 8,748,184  $ 1,217,221  $ 6,032,965  $ 2,715,219 244%
             
Summary Portfolio Data at September 30, 2014, Insolvency Portfolio - Domestic
($ in thousands)
        Actual Cash    
    Total Net Finance Collections Estimated Total Estimated
Purchase Purchase Estimated Receivables Including Cash Remaining  Collections to
Period Price Collections Balance Sales Collections Purchase Price
1996-2003  $ --   $ --   $ --   $ --   $ --  0%
2004  7,468  14,605  --   14,554  51 196%
2005  29,301  43,799  29  43,725  74 149%
2006  17,627  31,951  38  31,773  178 181%
2007  78,525  106,180  227  104,682  1,498 135%
2008  108,583  169,261  1,349  165,726  3,535 156%
2009  156,025  481,429  --   453,149  28,280 309%
2010  209,155  550,456  21,007  469,920  80,536 263%
2011  181,779  333,312  54,187  229,952  103,360 183%
2012  252,247  347,183  120,800  193,487  153,696 138%
2013  228,851  307,972  149,295  114,062  193,910 135%
2014  120,476  153,742  102,312  23,610  130,132 128%
Total  $ 1,390,037  $ 2,539,890  $ 449,244  $ 1,844,640  $ 695,250 183%
             
Summary Portfolio Data at September 30, 2014, Core Portfolio - Domestic
($ in thousands)
        Actual Cash    
    Total Net Finance Collections Estimated Total Estimated
Purchase Purchase Estimated Receivables Including Cash Remaining  Collections to
Period Price Collections Balance Sales Collections Purchase Price
1996  $ 3,080  $ 10,224  $ --   $ 10,216  $ 8 332%
1997  7,685  25,587  --   25,545  42 333%
1998  11,089  37,556  --   37,449  107 339%
1999  18,898  69,761  --   69,548  213 369%
2000  25,020  118,391  --   117,310  1,081 473%
2001  33,481  178,991  --   177,173  1,818 535%
2002  42,325  204,141  --   200,602  3,539 482%
2003  61,447  273,534  --   268,441  5,093 445%
2004  51,708  191,197  --   186,347  4,850 370%
2005  113,865  289,417  5,964  272,728  16,689 254%
2006  90,039  195,399  6,501  181,374  14,025 217%
2007  179,838  440,038  18,008  390,183  49,855 245%
2008  166,527  368,822  19,341  326,381  42,441 221%
2009  125,297  445,209  12,652  369,368  75,841 355%
2010  148,598  528,197  24,816  396,892  131,305 355%
2011  210,980  707,428  53,571  475,150  232,278 335%
2012  256,014  694,090  121,040  346,691  347,399 271%
2013  392,055  914,205  261,450  293,202  621,003 233%
2014  262,359  516,107  244,634  43,725  472,382 197%
Total  $ 2,200,305  $ 6,208,294  $ 767,977  $ 4,188,325  $ 2,019,969 282%

Use of Non-GAAP Financial Measures

Management believes that the presentation of certain financial information in this press release, excluding the costs associated with the Aktiv Kapital acquisition and the foreign exchange losses, specifically related to foreign currency forward contracts put in place between signing and closing of the Aktiv Kapital acquisition to mitigate the risk in converting dollars to euros, that were recorded during the three and nine months ended September 30, 2014, which is non-GAAP financial information, is useful to investors and improves the comparability of the Company's ongoing operational results between periods. The non-GAAP information should be considered in addition to, not as a substitute for, financial information prepared in accordance with GAAP.

 
PRA Group, Inc.
Reconciliation of Net Income, Earnings Per Share and Financial Ratios to GAAP Net Income, Earnings Per Share and Financial Ratios
(in thousands, except per share amounts)
             
             
  GAAP Three Less: Adjustments  Adjusted Three GAAP Nine Less: Adjustments  Adjusted Nine
  Three Months Ended Related to Aktiv Months Ended Months Ended Related to Aktiv Months Ended
  September 30, 2014 Kapital
Acquisition		 September 30, 2014 September 30, 2014 Kapital
Acquisition		 September 30, 2014
             
Revenues:            
Income recognized on finance receivables, net $ 224,326   $ 224,326 $ 584,814   $ 584,814
Fee income 12,882   12,882 43,659   43,659
Other revenue 1,765   1,765 1,765   1,765
             
Total revenues 238,973   238,973 630,238   630,238
             
Operating expenses:            
Compensation and employee services 65,237   65,237 169,083   169,083
Legal collection fees 13,778   13,778 35,982   35,982
Legal collection costs 20,367   20,367 72,329   72,329
Agency fees 5,988   5,988 8,902   8,902
Outside fees and services 17,221 (5,893) 11,328 40,125 (14,305) 25,820
Communications 8,907   8,907 26,019   26,019
Rent and occupancy 3,018   3,018 7,384   7,384
Depreciation and amortization 4,949   4,949 13,107   13,107
Other operating expenses 11,311   11,311 25,068   25,068
             
Total operating expenses 150,776 (5,893) 144,883 397,999 (14,305) 383,694
Income from operations 88,197 5,893 94,090 232,239 14,305 246,544
             
Other income and (expense):            
Interest income --   -- 2   2
Interest expense (11,808)   (11,808) (21,736)   (21,736)
Foreign exchange gain/(loss) 3,251 2,016 5,267 (2,961) 8,240 5,279
Income before income taxes 79,640 7,909 87,549 207,544 22,545 230,089
Provision for income taxes 28,473 2,828 31,301 78,030 8,476 86,506
Net income $ 51,167 $ 5,081 $ 56,248 $ 129,514 $ 14,069 $ 143,583
Adjustment for net income attributable to redeemable noncontrolling interest --   -- --   --
Net income attributable to PRA Group, Inc. $ 51,167 $ 5,081 $ 56,248 $ 129,514 $ 14,069 $ 143,583
             
Net income per common share attributable to PRA Group, Inc.:            
Basic  $ 1.02  $ 0.10  $ 1.12  $ 2.59  $ 0.28  $ 2.87
Diluted  $ 1.01  $ 0.10  $ 1.12  $ 2.57  $ 0.28  $ 2.85
             
Weighted average number of shares outstanding:            
Basic 50,075 50,075 50,075 50,023 50,023 50,023
Diluted 50,439 50,439 50,439 50,413 50,413 50,413
             
Operating margin: 36.9%   39.3% 36.8%   39.1%
Net income margin: 21.4%   23.5% 20.6%   22.8%
Return on average equity: 21.1%   23.2% 18.5%   20.5%

CONTACT: Investor Contact:

         Darby Schoenfeld

         Director of Investor Relations

         (757) 431-7913

         DCSchoenfeld@PRAGroup.com

         News Media Contact:

         Rick Goulart

         Vice President, Corporate Communications

         (757) 961-3525

         RickGoulart@PRAGroup.com

Source:  PRA Group

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