PRA Group Reports First Quarter 2017 Results

NORFOLK, Va., May 09, 2017 -- PRA Group (Nasdaq:PRAA), a global leader in acquiring and collecting nonperforming loans, today reported its financial results for the first quarter of 2017.  The company reported diluted earnings per share of $1.03 versus $0.69 in the first quarter of 2016, including the gain from the sale of the Company's Government Services business in the first quarter of 2017. 

First Quarter Highlights

  • Estimated remaining collections of $5.1 billion. 
  • Cash collections of $379.8 million. 
  • Total revenues of $206.6 million. 
  • Income from operations of $53.3 million.
  • Net income of $48.2 million. 
  • Portfolio acquisitions of $227.8 million.
  • Gain on sale of the Government Services business was $46.8 million pre-tax and excludes an additional $2.1 million in expenses associated with the sale in operating expenses.    

"PRA's cash collections in the first quarter exceeded our expectations while cash operating expenses remained controlled.  We are pleased with the progress made in increasing our collector workforce in the U.S. to the appropriate level.  Both our existing collector workforce and our new hires continue to impress us with their work ethic and commitment to compliance," said Steve Fredrickson, chairman and chief executive officer, PRA Group.  "Our cash efficiency ratio, measured as cash receipts less operating expenses divided by cash receipts, of 61% continues to compare well with previous years even with the impact of our current regulatory environment with its greater costs and negative impact on revenue.  We are also pleased with our first quarter investment, particularly in the U.S., where we see gradually improving volumes and pricing." 

CASH COLLECTIONS AND REVENUES

  • Cash collections were $379.8 million versus $384.3 million in the year-ago quarter.  First quarter of 2016 cash collections are presented in constant currency with the first quarter of 2017.  Adjusted for currency, cash collections in the prior year would have been $378.7 million.  The following table presents cash collections by source on an as reported and currency adjusted basis: 
               
Cash Collection Source   2017   2016
($ in thousands)   Q1   Q4 Q3 Q2 Q1
Americas-Core   $ 226,906   $ 193,360 $ 210,524 $ 213,741 $ 219,571
Americas-Insolvency     49,813     52,988   60,429   67,745   68,646
Europe-Core     98,081     97,429   96,028   102,972   94,091
Europe-Insolvency     5,030     4,974   4,719   2,744   2,025
Total Cash Collections   $ 379,830   $ 348,751 $ 371,700 $ 387,202 $ 384,333
               
               
               
Cash Collection Source -               
Constant Currency Adjusted   2017         2016
($ in thousands)   Q1         Q1
Americas-Core   $ 226,906         $ 220,992
Americas-Insolvency     49,813           68,653
Europe-Core     98,081           87,220
Europe-Insolvency     5,030           1,833
Total Cash Collections   $ 379,830         $ 378,698
               
               
  • Total revenues were $206.6 million in the first quarter versus $224.9 million in the year-ago quarter.  Net finance receivable revenue was $194.5 million versus $206.5 million in the year ago quarter.    
  • Revenues in the first quarter also included income from PRA Group's fee-based businesses of $9.9 million, compared with $16.3 million in the year-ago quarter, and other income of $2.2 million compared with $2.1 million in the year-ago quarter.  The decline in fee revenue was due to the sale of the Government Services business in Q1 2017. 

EXPENSES AND OPERATING INCOME

  • Operating expenses were $153.3 million in the first quarter, compared with $154.0 million a year ago. 
  • Operating income in the first quarter was $53.3 million, compared with $70.9 million in the year-ago quarter and the operating margin was 25.8%. 
  • The provision for income taxes was $31.4 million in the first quarter compared to $16.2 million in the year-ago quarter.  PRA Group's provision for income taxes was 38.8% of income before taxes in the first quarter, compared with 32.2% in the full year of 2016.  The effective tax rate in the first quarter of 2017 was elevated due to the sale of the Government Services business which increased the amount of taxable income in the United States.

NET INCOME AND EPS

  • Net income was $48.2 million in the first quarter, compared with net income of $32.0 million in the prior year period, and the net income margin was 24.0%. 
  • Earnings per diluted share in the first quarter were $1.03, compared with $0.69 in the prior year period.          

PORTFOLIO ACQUISITIONS

  • PRA Group invested $227.8 million in new finance receivables in the first quarter.    
               
Portfolio Purchase Source   2017   2016
($ in thousands)   Q1   Q4 Q3 Q2 Q1
Americas-Core   $ 115,166   $ 91,800 $ 95,452 $ 130,529 $ 136,057
Americas-Insolvency     67,123     20,929   16,760   33,723   22,952
Europe-Core     39,505     80,129   34,240   68,835   171,038
Europe-Insolvency     6,020     6,943   14,803   16,410   6,731
Total Portfolio Purchasing   $ 227,814   $ 199,801 $ 161,255 $ 249,497 $ 336,778
               
         

BALANCE SHEET

  • Cash and cash equivalents were $82.1 million as of March 31, 2017, compared with $79.4 million as of March 31, 2016. 
  • Net deferred tax liabilities were $259.3 million as of March 31, 2017, compared with $269.2 million as of March 31, 2016. 
  • Borrowings totaled $1,708.7 million as of March 31, 2017, compared with $1,896.4 million as of March 31, 2016. 
  • Equity attributable to PRA Group, Inc. was $930.8 million as of March 31, 2017, compared with $864.9 million as of March 31, 2016.   

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.cfm.   To listen by phone, call 888-695-7639 in the U.S. or 970-315-0482 outside the U.S.  The conference ID is 14428598.  To listen to a replay of the call until May 16, 2017, call 855-859-2056 in the U.S. or 404-537-3406 outside the U.S. and use conference ID 14428598.                         

About PRA Group
As a global leader in acquiring and collecting nonperforming loans, PRA Group returns capital to banks and other creditors to help expand financial services for consumers in the Americas and Europe. With more than 4,000 employees worldwide, PRA Group companies collaborate with customers to help them resolve their debt and provide a broad range of additional revenue and recovery services to businesses. 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 financial 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 Commission including 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, which are available through PRA Group's website and contain a 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  
  March 31,  
   2017     2016   
         
Revenues:        
Income recognized on finance receivables, net $ 194,535     $ 206,507    
Fee income   9,858       16,266    
Other revenue   2,165       2,109    
Total revenues   206,558       224,882    
         
Operating expenses:        
Compensation and employee services   68,468       66,765    
Legal collection expenses   31,728       30,132    
Agency fees   10,800       10,884    
Outside fees and services   13,285       15,808    
Communication   9,137       9,882    
Rent and occupancy   3,783       3,796    
Depreciation and amortization   5,215       6,070    
Other operating expenses   10,885       10,651    
Total operating expenses   153,301       153,988    
Income from operations   53,257       70,894    
         
Other income and (expense):        
Gain on sale of subsidiaries   46,845       -    
Interest expense   (21,257 )     (19,959 )  
Foreign exchange gain/(loss)   2,179       (1,850 )  
Income before income taxes   81,024       49,085    
         
Provision for income taxes   31,409       16,232    
Net income $ 49,615     $ 32,853    
Adjustment for net income attributable to noncontrolling interests   1,448       870    
Net income attributable to PRA Group, Inc. $ 48,167     $ 31,983    
         
Net income per common share attributable to PRA Group, Inc.:        
Basic $ 1.04     $ 0.69    
Diluted $ 1.03     $ 0.69    
         
Weighted average number of shares outstanding:        
Basic   46,406       46,243    
Diluted   46,627       46,372    

 

PRA Group, Inc.  
Unaudited Consolidated Balance Sheets  
(in thousands)  
           
    March 31,   December 31,  
ASSETS  2017     2016   
           
Cash and cash equivalents $   82,110     $   94,287    
Investments   74,055       68,543    
Finance receivables, net   2,366,880       2,307,969    
Other receivables, net   17,684       11,650    
Income taxes receivable   -       9,427    
Net deferred tax asset   29,090       28,482    
Property and equipment, net   38,024       38,744    
Goodwill     506,240       499,911    
Intangible assets, net   27,393       27,935    
Other assets   32,373       33,808    
Assets held for sale   -       43,243    
           
Total assets $   3,173,849     $   3,163,999    
           
LIABILITIES AND EQUITY        
           
Liabilities:          
Accounts payable $   3,924     $   2,459    
Accrued expenses   82,594       82,699    
Income taxes payable   37,960       19,631    
Net deferred tax liability   259,330       258,344    
Interest-bearing deposits   78,792       76,113    
Borrowings   1,708,687       1,784,101    
Other liabilities   13,344       10,821    
Liabilities held for sale   -       4,220    
           
Total liabilities   2,184,631       2,238,388    
           
Redeemable noncontrolling interest   8,515       8,448    
           
Equity          
Preferred stock, par value $0.01, authorized shares, 2,000,        
issued and outstanding shares, 0   -       -    
Common stock, par value $0.01, authorized shares, 100,000, issued        
and outstanding shares, 46,439 at March 31, 2017; 100,000         
authorized shares, 46,356 issued and outstanding shares at    464       464    
December 31, 2016        
Additional paid-in capital   66,293       66,414    
Retained earnings   1,097,534       1,049,367    
Accumulated other comprehensive loss   (233,476 )     (251,944 )  
Total stockholders' equity - PRA Group, Inc.   930,815       864,301    
Noncontrolling interest   49,888       52,862    
Total equity   980,703       917,163    
Total liabilities and equity $   3,173,849     $   3,163,999    
           

 

PRA Group, Inc.  
FINANCIAL HIGHLIGHTS  
  As of and for the   
  Three Months Ended March 31,  
   2017   2016  Change  
EARNINGS (in thousands)        
Income recognized on finance receivables, net $ 194,535   $ 206,507   -6 %  
Fee income   9,858     16,266   -39 %  
Other revenue   2,165     2,109   3 %  
Total revenues   206,558     224,882   -8 %  
Operating expenses   153,301     153,988   0 %  
Income from operations   53,257     70,894   -25 %  
Net interest expense   21,257     19,959   7 %  
Net income   49,615     32,853   51 %  
Net income attributable to PRA Group, Inc.   48,167     31,983   51 %  
         
PERIOD-END BALANCES (in thousands)        
Cash and cash equivalents $ 82,110   $ 79,442   3 %  
Finance receivables, net   2,366,880     2,377,077   0 %  
Goodwill and intangible assets, net   533,633     557,024   -4 %  
Total assets   3,173,849     3,268,833   -3 %  
Borrowings   1,708,687     1,896,424   -10 %  
Total liabilities   2,184,631     2,360,091   -7 %  
Total equity - PRA Group, Inc.   930,815     864,868   8 %  
         
FINANCE RECEIVABLE INCOME (dollars in thousands)        
Cash collections $ 379,830   $ 384,333   -1 %  
Cash collections on fully amortized pools   13,504     9,276   46 %  
Principal amortization without allowance charges   182,616     167,928   9 %  
Allowance charges   2,679     9,898   -73 %  
Principal amortization with allowance charges   185,295     177,826   4 %  
Principal amortization w/ allowance charges as % of cash collections:        
Including fully amortized pools   48.8 %   46.3 % 5 %  
Excluding fully amortized pools   50.6 %   47.4 % 7 %  
Allowance charges to period-end net finance receivables   0.1 %   0.4 % -73 %  
         
PURCHASES OF FINANCE RECEIVABLES (dollars in thousands)        
Purchase price - Americas core $ 115,166   $ 136,057   -15 %  
Purchase price - Americas insolvency   67,123     22,952   192 %  
Purchase price - Europe core   39,505     171,038   -77 %  
Purchase price - Europe insolvency   6,020     6,731   -11 %  
Purchase price - total   227,814     336,778   -32 %  
Number of portfolios - total   126     139   -9 %  
         
ESTIMATED REMAINING COLLECTIONS (in thousands)        
Estimated remaining collections - Americas core $ 2,604,039   $ 2,643,410   -1 %  
Estimated remaining collections - Americas insolvency   373,729     421,866   -11 %  
Estimated remaining collections - Europe core   2,089,659     2,152,403   -3 %  
Estimated remaining collections - Europe insolvency   75,942     40,938   86 %  
Estimated remaining collections - total   5,143,369     5,258,617   -2 %  
Adjusted estimated remaining collections (7)   5,206,044     5,366,417   -3 %  
         
SHARE DATA (share amounts in thousands)        
Net income per common share - diluted $ 1.03   $ 0.69   50 %  
Weighted average number of shares outstanding - diluted   46,627     46,372   1 %  
Shares repurchased   -     -   0 %  
Closing market price $ 33.15   $ 29.39   13 %  
         
RATIOS AND OTHER DATA (dollars in thousands)        
Return on average equity (1)   20.6 %   15.4 % 34 %  
Return on revenue (2)   24.0 %   14.6 % 64 %  
Return on average assets (3)   6.1 %   4.1 % 48 %  
Operating margin (4)   25.8 %   31.5 % -18 %  
Operating expense to cash receipts (5)   39.3 %   38.4 % 2 %  
Debt to stockholders' equity (6)   183.6 %   219.3 % -16 %  
Number of full-time equivalent collectors   2,294     1,881   22 %  
Number of full-time equivalent employees   4,205     3,748   12 %  
Cash receipts (5) $ 389,688   $ 400,599   -3 %  
Lines of credit - unused portion at period end   712,637     435,709   64 %  
         
(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        
(7)  Equals total estimated remaining collections on our owned finance receivable       
portfolios plus the estimated remaining collections on certain of our other investments.      
         

 

PRA Group, Inc.
FINANCIAL HIGHLIGHTS
   For the Quarter Ended
  March 31 December 31 September 30 June 30 March 31
   2017   2016   2016   2016   2016 
EARNINGS (in thousands)          
Income recognized on finance receivables, net $ 194,535   $ 131,965   $ 202,639   $ 204,008   $ 206,507  
Fee income   9,858     21,171     17,597     22,347     16,266  
Other revenue   2,165     2,122     1,748     2,101     2,109  
Total revenues   206,558     155,258     221,984     228,456     224,882  
Operating expenses   153,301     148,190     154,496     155,700     153,988  
Income from operations   53,257     7,068     67,488     72,756     70,894  
Net interest expense   21,257     21,026     19,310     20,569     19,959  
Net income/(loss)   49,615     (15,347 )   36,518     36,868     32,853  
Net income/(loss) attributable to PRA Group, Inc.   48,167     (17,648 )   34,306     36,456     31,983  
           
PERIOD-END BALANCES (in thousands)          
Cash and cash equivalents $ 82,110   $ 94,287   $ 91,791   $ 117,071   $ 79,442  
Finance receivables, net   2,366,880     2,307,969     2,392,408     2,399,949     2,377,077  
Goodwill and intangible assets, net   533,633     527,846     592,044     576,992     557,024  
Total assets   3,173,849     3,163,999     3,279,347     3,305,596     3,268,833  
Borrowings   1,708,687     1,784,101     1,816,600     1,912,283     1,896,424  
Total liabilities   2,184,631     2,238,388     2,291,369     2,370,415     2,360,091  
Total equity - PRA Group, Inc.   930,815     864,301     937,702     886,077     864,868  
           
FINANCE RECEIVABLE COLLECTIONS (dollars in thousands)          
Cash collections $ 379,830   $ 348,751   $ 371,700   $ 387,202   $ 384,333  
Cash collections on fully amortized pools   13,504     9,041     7,744     8,124     9,276  
Principal amortization without allowance charges   182,616     154,271     155,915     170,274     167,928  
Allowance charges   2,679     62,515     13,146     12,920     9,898  
Principal amortization with allowance charges   185,295     216,786     169,061     183,194     177,826  
Principal amortization w/ allowance charges as % of cash collections:          
Including fully amortized pools   48.8 %   62.2 %   45.5 %   47.3 %   46.3 %
Excluding fully amortized pools   50.6 %   63.8 %   46.5 %   48.3 %   47.4 %
Allowance charges to period-end net finance receivables   0.1 %   2.7 %   0.5 %   0.5 %   0.4 %
           
PURCHASES OF FINANCE RECEIVABLES (dollars in thousands)          
Purchase price - North America core $ 115,166   $ 91,800   $ 95,452   $ 130,529   $ 136,057  
Purchase price - North America insolvency   67,123     20,929     16,760     33,723     22,952  
Purchase price - Europe core   39,505     80,129     34,240     68,835     171,038  
Purchase price - Europe insolvency   6,020     6,943     14,803     16,410     6,731  
Purchase price - total   227,814     199,801     161,255     249,497     336,778  
Number of portfolios - total   126     126     122     136     139  
           
ESTIMATED REMAINING COLLECTIONS (in thousands)          
Estimated remaining collections - Americas core $ 2,604,039   $ 2,571,887   $ 2,672,427   $ 2,705,781   $ 2,643,410  
Estimated remaining collections - Americas insolvency   373,729     331,371     356,363     396,667     421,866  
Estimated remaining collections - Europe core   2,089,659     2,072,936     2,148,230     2,171,542     2,152,403  
Estimated remaining collections - Europe insolvency   75,942     71,810     72,919     59,107     40,938  
Estimated remaining collections - total   5,143,369     5,048,004     5,249,939     5,333,097     5,258,617  
Adjusted estimated remaining collections (7)   5,206,044     5,109,404     5,345,657     5,430,192     5,366,417  
           
SHARE DATA (share amounts in thousands)          
Net income/(loss) per common share - diluted $ 1.03   $ (0.38 ) $ 0.74   $ 0.79   $ 0.69  
Weighted average number of shares outstanding - diluted   46,627     46,346     46,434     46,402     46,372  
Shares repurchased   -     -     -     -     -  
Closing market price $ 33.15   $ 39.10   $ 34.54   $ 24.14   $ 29.39  
           
RATIOS AND OTHER DATA (dollars in thousands)          
Return on average equity (1)   20.6 %   -7.9 %   15.1 %   16.4 %   15.4 %
Return on revenue (2)   24.0 %   -9.9 %   16.5 %   16.1 %   14.6 %
Return on average assets (3)   6.1 %   -2.2 %   4.2 %   4.4 %   4.1 %
Operating margin (4)   25.8 %   4.6 %   30.4 %   31.8 %   31.5 %
Operating expense to cash receipts (5)   39.3 %   40.1 %   39.7 %   38.0 %   38.4 %
Debt to stockholders' equity (6)   183.6 %   206.4 %   193.7 %   215.8 %   219.3 %
Number of full-time equivalent collectors   2,294     1,906     1,859     1,804     1,881  
Number of full-time equivalent employees   4,205     4,019     3,859     3,816     3,748  
Cash receipts (5) $ 389,688   $ 369,922   $ 389,297   $ 409,549   $ 400,599  
Lines of credit - unused portion at period end   712,637     641,132     630,775     430,651     435,709  
           
(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          
(7)  Equals total estimated remaining collections on our owned finance receivable         
portfolios plus the estimated remaining collections on certain of our other investments.        
           

Investor Contact:
Darby Schoenfeld
Director of Investor Relations
(757) 431-7913
Darby.Schoenfeld@PRAGroup.com

News Media Contact:
Nancy Porter
Vice President, Corporate Communications
(757) 431-7950
Nancy.Porter@PRAGroup.com