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PRA Group Reports Second Quarter 2017 Results

NORFOLK, Va., Aug. 08, 2017 (GLOBE NEWSWIRE) -- PRA Group (Nasdaq:PRAA), a global leader in acquiring and collecting nonperforming loans, today reported its financial results for the second quarter of 2017.  The company reported net income of $11.7 million in the second quarter, compared with $36.5 million in the prior year period.  Diluted earnings per share were $0.25 versus $0.79 in the second quarter of 2016.

Second Quarter Business Highlights

  • Delivered record quarterly investment in purchased portfolios in Americas Core and Americas Insolvency, outside of a business acquisition.
  • Hired almost 900 net new U.S. collectors since June of 2016, including nearly 250 in the second quarter of 2017 alone.
  • Plan to open new domestic call centers in order to provide continued, expanded service to customers and sellers. 
  • Grew cash collections in all segments on a currency adjusted basis compared with second quarter of 2016 except Americas Insolvency, where cash collections grew sequentially for the first time since the second quarter of 2014. 
  • Expanded North American credit facility to $1.2 billion and issued $345 million in convertible senior notes.  Capital available for portfolio purchases of $1.1 billion globally.   

Second Quarter Financial Highlights

  • Estimated remaining collections of $5.3 billion consistent with the prior year quarter and an increase of $181 million since the first quarter of 2017. 
  • Cash collections of $374.7 million versus $387.2 million in the prior year quarter. 
  • Total revenues of $200.3 million versus $228.5 million in the prior year quarter. 
  • Income from operations of $48.3 million versus $72.8 million in the prior year quarter.
  • Net income of $11.7 million versus $36.5 million in the prior year quarter. 
  • Portfolio acquisitions of $295.6 million versus $249.5 million in the prior year quarter.

"We continue to be excited about volumes and the significant level of investment in both Core and Insolvency in the United States.  We are committed to working with customers to resolve their debt and helping sellers optimize the value of their charged-off inventories.  To accommodate larger purchasing volumes, we are preparing to open new call centers in the U.S.," said Kevin Stevenson, president and chief executive officer.   "During the quarter, we saw growth in currency adjusted cash collection in all segments except for Americas Insolvency, which grew sequentially for the first time in three years.  We are very encouraged by both the industry and internal trends."

CASH COLLECTIONS AND REVENUES

  • The following table presents cash collections by quarter and by source on an as reported and currency adjusted basis:
               
Cash Collection Source     2017     2016
($ in thousands)   Q2 Q1   Q4 Q3 Q2
Americas-Core   $   217,020 $   226,906   $   193,360 $   210,524 $   213,741
Americas-Insolvency       53,163     49,813       52,988     60,429     67,745
Europe-Core       99,121     98,081       97,429     96,028     102,972
Europe-Insolvency       5,371     5,030       4,974     4,719     2,744
Total Cash Collections   $   374,675 $   379,830   $   348,751 $   371,700 $   387,202
               
               
               
Cash Collection Source -               
Constant Currency Adjusted     2017           2016
($ in thousands)   Q2         Q2
Americas-Core   $   217,020         $   214,982
Americas-Insolvency       53,163             67,697
Europe-Core       99,121             96,886
Europe-Insolvency       5,371             2,571
Total Cash Collections   $   374,675         $   382,136
               
               
  • Currency adjusted cash collections in the quarter increased in all categories except for Americas Insolvency; however, cash collections in Americas Insolvency increased sequentially for the first time since the second quarter of 2014.    
  • Net finance receivable revenue was lower than the prior year quarter due in large part to the reduction in finance receivable balances from the elevated allowance charges recorded in 2016 and normal attrition.  This was partially offset by significant portfolio purchases in the first half of 2017. 
  • The change in the fee income is primarily the result of the sale of Government Services in the first quarter of 2017 and a decrease in fee income generated by the Claims Compensation Bureau business which experienced an outsized second quarter in 2016. 
  • The Company recorded a gain of $1.3 million from the sale of PRA Location Services during the quarter. 

EXPENSES

  • Operating expenses decreased from the previous year largely due to decreased legal collection expenses and agency fees.  The decline in legal collection expense resulted primarily from an increased number of lower balance accounts which are less likely to be pursued legally and improvements to the legal selection methodology in the U.S.  The decline in agency fees is primarily the result of the Company establishing a legal collection process in Italy and shifting accounts from regular collections into legal collections. 
  • The Company incurred nonrecurring pre-tax charges of $2.3 million in legal fees not associated with normal operations, $1.0 million in expenses related to PRA Location Services and $0.7 million related to the amended and restated North American credit facility and the convertible senior notes issuance. 
  • The Company also recorded $1.8 million in pre-tax, noncash interest expense related to its convertible notes whose effective interest rates are 4.92% and 6.20%. 
  • Year-to-date tax expense was 39.9% of income before income taxes compared with 32.2% for full-year 2016, due primarily to changes in the mix of earnings and state tax rates.     

PORTFOLIO ACQUISITIONS

  • PRA Group invested $295.6 million in new finance receivables in the second quarter. 
                 
  Portfolio Purchase Source     2017     2016
  ($ in thousands)   Q2 Q1   Q4 Q3 Q2
  Americas-Core   $   144,871 $   115,166   $   91,800 $   95,452 $   130,529
  Americas-Insolvency       100,040     67,123       20,929     16,760     33,723
  Europe-Core       42,876     39,505       80,129     34,240     68,835
  Europe-Insolvency       7,860     6,020       6,943     14,803     16,410
  Total Portfolio Purchasing   $   295,647 $   227,814   $   199,801 $   161,255 $   249,497
                 
             

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 and view the accompanying slides, 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 63045731.  To listen to a replay of the call until August 15, 2017, call 855-859-2056 in the U.S. or 404-537-3406 outside the U.S. and use conference ID 63045731.                         

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 4,500 employees worldwide, PRA Group companies collaborate with customers to help them resolve their debt. 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   Six Months Ended
              June 30,   June 30,
                2017       2016       2017       2016  
                           
Revenues:              
  Income recognized on finance receivables, net $ 190,843     $ 204,008     $ 385,378     $   410,515  
  Fee income   6,344       22,347       16,202       38,613  
  Other revenue   3,145       2,101       5,310       4,210  
        Total revenues   200,332       228,456       406,890       453,338  
                           
Operating expenses:              
  Compensation and employee services   66,771       64,793       135,239       131,558  
  Legal collection expenses   31,202       33,897       62,930       64,029  
  Agency fees   9,254       11,309       20,054       22,193  
  Outside fees and services   18,061       15,876       31,346       31,684  
  Communication   7,254       8,423       16,391       18,305  
  Rent and occupancy   3,387       4,038       7,170       7,834  
  Depreciation and amortization   5,041       6,085       10,256       12,155  
  Other operating expenses   11,046       11,279       21,931       21,930  
        Total operating expenses   152,016       155,700       305,317       309,688  
        Income from operations   48,316       72,756       101,573       143,650  
                           
Other income and (expense):              
  Gain on sale of subsidiaries   1,322       -       48,167       -  
  Interest expense   (22,506 )     (20,569 )     (43,763 )     (40,528 )
  Foreign exchange (loss)/gain   (2,516 )     2,029       (337 )     179  
        Income before income taxes   24,616       54,216       105,640       103,301  
                           
        Provision for income taxes   10,766       17,348       42,175       33,580  
        Net income $   13,850     $   36,868     $   63,465     $   69,721  
          Adjustment for net income attributable to noncontrolling interests   2,177       412       3,625       1,282  
        Net income attributable to PRA Group, Inc. $   11,673     $   36,456     $   59,840     $   68,439  
                           
Net income per common share attributable to PRA Group, Inc.:              
  Basic     $   0.25     $   0.79     $   1.30     $   1.48  
  Diluted   $   0.25     $   0.79     $   1.29     $   1.48  
                           
Weighted average number of shares outstanding:              
  Basic       45,941       46,333       46,173       46,288  
  Diluted     46,060       46,402       46,344       46,387  
                           

 

PRA Group, Inc.  
Consolidated Balance Sheets  
(in thousands)  
              (unaudited)      
              June 30,   December 31,  
ASSETS   2017       2016    
                     
Cash and cash equivalents $   92,756     $   94,287    
Investments   76,438       68,543    
Finance receivables, net   2,520,883       2,307,969    
Other receivables, net   11,306       11,650    
Income taxes receivable   2,865       9,427    
Net deferred tax asset   37,299       28,482    
Property and equipment, net   36,532       38,744    
Goodwill       516,165       499,911    
Intangible assets, net   25,878       27,935    
Other assets   40,489       33,808    
Assets held for sale   -       43,243    
                     
          Total assets $   3,360,611     $   3,163,999    
                     
LIABILITIES AND EQUITY        
                     
Liabilities:          
  Accounts payable $   3,694     $   2,459    
  Accrued expenses   77,869       82,699    
  Income taxes payable   19,793       19,631    
  Net deferred tax liability   250,821       258,344    
  Interest-bearing deposits   92,479       76,113    
  Borrowings   1,899,148       1,784,101    
  Other liabilities   3,094       10,821    
  Liabilities held for sale   -       4,220    
                     
          Total liabilities   2,346,898       2,238,388    
                     
Redeemable noncontrolling interest   8,860       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, 45,166 at June 30, 2017; 100,000 authorized        
      shares, 46,356 issued and outstanding shares at December 31, 2016   452       464    
    Additional paid-in capital   49,928       66,414    
    Retained earnings   1,109,207       1,049,367    
    Accumulated other comprehensive loss   (204,213 )     (251,944 )  
      Total stockholders' equity - PRA Group, Inc.   955,374       864,301    
        Noncontrolling interest   49,479       52,862    
        Total equity   1,004,853       917,163    
          Total liabilities and equity $   3,360,611     $   3,163,999    
                     

 

Investor Contact:
Darby Schoenfeld
Vice President, Investor Relations
(757) 431-7913
Darby.Schoenfeld@PRAGroup.com

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