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PRA Group Reports First Quarter 2015 Results

NORFOLK, Va., May 6, 2015 (GLOBE NEWSWIRE) -- PRA Group (Nasdaq:PRAA), a global leader in acquiring defaulted receivables, today reported its financial results for the first quarter of 2015.

First Quarter Highlights

  • Cash collections of $399.7 million, up 28% from the first quarter of 2014.
  • Revenues of $245.2 million, up 26%.
  • Income from operations of $96.2 million, up 34%.
  • Net income of $58.1 million, up 42%.
  • $1.19 diluted earnings per share, compared with $0.81 in the year-ago quarter, up 47%.
  • 30.1% return on average equity, annualized.
  • $212.9 million in investments.

"We are very pleased with the strong start to 2015. Our investment levels continue to be high, setting a record of $139 million in core portfolios in the Americas," said Steve Fredrickson, chairman, president and chief executive officer, PRA Group. "PRA Group also produced another record by collecting almost $400 million during the period. This quarter produced the type of results we look to deliver and we will work hard to continue this momentum through the year."

REVENUES

  • Total revenues of $245.2 million in the first quarter included finance receivables income net of principal amortization and net allowance charges. Net finance receivables income was $228.4 million, up 28% from $178.0 million in the year-ago quarter.
  • Cash collections increased 28% in the first quarter from the year-ago quarter to $399.7 million, and included collections from these finance receivables sources:

Cash Collection Source ($ in thousands) Q12015 Q42014 Q32014 Q22014 Q12014
Americas-Core $ 219,371 $ 185,921 $ 189,027 $ 190,229 $ 187,818
Americas-Insolvency 95,533 103,104 110,544 124,101 120,702
Europe-Core 83,876 84,398 73,172 4,944 4,847
Europe-Insolvency 967 5 -- -- --
Total Cash Collections $ 399,747 $ 373,428 $ 372,743 $ 319,274 $ 313,367

  • Principal amortization of finance receivables in the first quarter was $171.3 million or 42.9% of cash collections, compared with 43.2% in the year-ago quarter. Principal amortization included a net allowance charge of $1.6 million recorded against certain pools of finance receivables in the quarter, compared with a net allowance reversal of $2.0 million recorded in the year-ago quarter.
  • Revenues in the first quarter also included income from PRA Group's fee-based businesses of $13.1 million, compared with $15.6 million in the year-ago quarter.

EXPENSES AND OPERATING INCOME

  • Operating expenses were $149.0 million in the first quarter, compared with $122.3 million a year ago, an increase of 22%.
  • Operating income in the first quarter was $96.2 million, compared with $71.6 million in the year-ago quarter. The operating margin was 39.2% in the first quarter.
  • The provision for income taxes was $30.0 million in the first quarter, up 16% from the year-ago quarter. PRA Group's provision for income taxes was 34.1% of income before taxes in the first quarter, compared with 38.8% in the year-ago quarter, reflecting the impact of earning income in lower tax rate geographies.

PORTFOLIO ACQUISITIONS

  • PRA Group invested $185.0 million in new finance receivables purchased from receivable sellers in the first quarter. The Company also invested $27.9 million in a securitized fund in Poland specifically formed to purchase and collect on Polish finance receivables. This brought total investment in the quarter to $212.9 million. This compares with $152.7 million in the year-ago quarter.

Portfolio Purchase Source ($ in thousands) Q12015 Q42014 Q32014 Q22014 Q12014
Americas-Core $ 138,498 $ 119,714 $ 118,018 $ 91,904 $ 79,085
Americas-Insolvency 16,437 24,949 38,535 16,187 72,003
Europe-Core (1) 21,579 123,194 734,803 1,121 1,626
Europe-Insolvency 8,510 11,625 -- -- --
Total Portfolio Purchasing $ 185,024 $ 279,482 $ 891,356 $ 109,212 $ 152,714
(1) Excludes the $27.9 million and $34.7 million investment in the securitized fund in Poland during the three months ended March 31, 2015 and December 31, 2014, respectively.

BALANCE SHEET

  • Borrowings totaled $1,479.3 million at March 31, 2015, consisting of $467.8 million drawn on the domestic revolver, $398.4 million drawn on the multi-currency revolver, $261.9 million in convertible senior notes, $181.3 million in other long-term debt and $169.9 million in seller financing related to the acquisition of Aktiv Kapital. Total borrowings were $450.3 million at March 31, 2014.
  • Cash and cash equivalents were $40.5 million at March 31, 2015, compared with $191.8 million at March 31, 2014.
  • During the first quarter, the Company repurchased approximately 1.5 million shares of its common stock for $77.8 million at an average price of $52.65.
  • Net deferred tax liabilities were $265.7 million at March 31, 2015, compared with $220.9 million at March 31, 2014.
  • Stockholders' equity was $817.3 million at March 31, 2015, compared with $910.2 million at March 31, 2014.

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 30685528. 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 May 13, 2015, call 855-859-2056 in the U.S. or 404-537-3406 outside the U.S. and use conference ID 30685528.

About PRA Group

As a global leader in acquiring defaulted receivables, PRA Group (Nasdaq:PRAA) 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 provide a broad range of additional 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 for eight consecutive years 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 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, filed with the Securities and Exchange Commission and available through PRA Group's website, which 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,
2015 2014
Revenues:
Income recognized on finance receivables, net $ 228,403 $ 177,970
Fee income 13,053 15,608
Other revenue 3,750 344
Total revenues 245,206 193,922
Operating expenses:
Compensation and employee services 65,271 51,385
Legal collection fees 13,691 10,833
Legal collection costs 20,854 26,533
Agency fees 8,261 1,450
Outside fees and services 12,797 10,791
Communication 10,418 8,963
Rent and occupancy 3,560 2,338
Depreciation and amortization 4,610 3,947
Other operating expenses 9,578 6,100
Total operating expenses 149,040 122,340
Income from operations 96,166 71,582
Other income and (expense):
Interest income 147 1
Interest expense (14,923) (4,860)
Net foreign exchange gain 6,789 8
Income before income taxes 88,179 66,731
Provision for income taxes 30,044 25,891
Net income $ 58,135 $ 40,840
Net income per common share:
Basic $ 1.19 $ 0.82
Diluted $ 1.19 $ 0.81
Weighted average number of shares outstanding:
Basic 48,724 49,929
Diluted 49,052 50,363
PRA Group, Inc.
Unaudited Consolidated Balance Sheets
(in thousands, except per share amounts)
March 31, December 31,
ASSETS 2015 2014
Cash and cash equivalents $ 40,542 $ 39,661
Investments 91,470 89,703
Finance receivables, net 1,954,772 2,001,790
Other receivables, net 16,834 12,959
Net deferred tax asset 5,771 6,126
Property and equipment, net 46,855 48,258
Goodwill 496,653 527,445
Intangible assets, net 10,042 10,933
Other assets 37,674 41,876
Total assets $ 2,700,613 $ 2,778,751
LIABILITIES AND EQUITY
Liabilities:
Accounts payable $ 7,838 $ 4,446
Accrued expenses 69,250 89,361
Income taxes payable 22,120 11,020
Other liabilities 6,725 5,962
Net deferred tax liability 265,661 255,587
Interest bearing deposits 32,439 27,704
Borrowings 1,479,262 1,482,456
Total liabilities 1,883,295 1,876,536
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, 48,320 issued and outstanding shares at March 31, 2015, and 49,577 issued and outstanding shares at December 31, 2014 483 496
Additional paid-in capital 31,339 111,659
Retained earnings 964,145 906,010
Accumulated other comprehensive (loss) (178,649) (115,950)
Total stockholders' equity 817,318 902,215
Total liabilities and equity $ 2,700,613 $ 2,778,751
PRA Group, Inc.
FINANCIAL HIGHLIGHTS
As of and for the
Three Months Ended March 31,
2015 2014 Change
EARNINGS (in thousands)
Income recognized on finance receivables, net $ 228,403 $ 177,970 28%
Fee income 13,053 15,608 -16%
Other revenue 3,750 344 990%
Total revenues 245,206 193,922 26%
Operating expenses 149,040 122,340 22%
Income from operations 96,166 71,582 34%
Net interest expense 14,776 4,859 204%
Net income 58,135 40,840 42%
PERIOD-END BALANCES (in thousands)
Cash and cash equivalents $ 40,542 $ 191,819 -79%
Finance receivables, net 1,954,772 1,253,961 56%
Goodwill and intangible assets, net 506,695 118,800 327%
Total assets 2,700,613 1,642,613 64%
Borrowings 1,479,262 450,278 229%
Total liabilities 1,883,295 732,395 157%
Total equity 817,318 910,218 -10%
FINANCE RECEIVABLE INCOME (dollars in thousands)
Cash collections $ 399,747 $ 313,367 28%
Cash collections on fully amortized pools 17,005 16,516 3%
Principal amortization without allowance (reversals)/charges 169,714 137,350 24%
Allowance (reversal)/charge 1,630 (1,953) -183%
Principal amortization with allowance (reversals)/charges 171,344 135,397 27%
Principal amortization w/ allowance charges as % of cash collections:
Including fully amortized pools 42.9% 43.2% -1%
Excluding fully amortized pools 44.8% 45.6% -2%
Allowance (reversal)/charge to period-end net finance receivables 0.1% (0.2%) -154%
PURCHASES OF FINANCE RECEIVABLES (dollars in thousands)
Purchase price - Americas core $ 138,498 $ 79,085 75%
Purchase price - Americas insolvency 16,437 72,003 -77%
Purchase price - Europe core 21,579 1,626 1227%
Purchase price - Europe insolvency 8,510 -- 100%
Purchase price - total 185,024 152,714 21%
Number of portfolios - total 139 104 34%
ESTIMATED REMAINING COLLECTIONS (in thousands)
Estimated remaining collections - Americas core $ 2,370,086 $ 1,891,511 25%
Estimated remaining collections - Americas insolvency 577,319 793,855 -27%
Estimated remaining collections - Europe core 1,619,454 19,358 8266%
Estimated remaining collections - Europe insolvency 24,838 -- 100%
Estimated remaining collections - total 4,591,697 2,704,724 70%
Adjusted estimated remaining collections (7) 4,716,230 -- --
SHARE DATA (share amounts in thousands)
Net income per common share - diluted $ 1.19 $ 0.81 47%
Weighted average number of shares outstanding - diluted 49,052 50,363 -3%
Shares repurchased 1,478 -- 100%
Average price paid per share repurchased (including acquisitions costs) $ 52.65 $ -- 100%
Closing market price $ 54.32 $ 57.86 -6%
RATIOS AND OTHER DATA (dollars in thousands)
Return on average equity (1) 30.1% 18.2% 65%
Return on revenue (2) 23.7% 21.1% 13%
Return on average assets (3) 8.7% 10.0% -13%
Operating margin (4) 39.2% 36.9% 6%
Operating expense to cash receipts (5) 36.1% 37.2% -3%
Debt to equity (6) 181.0% 49.5% 266%
Number of full-time equivalent collectors 2,395 2,379 1%
Number of full-time equivalent employees 3,847 3,621 6%
Cash receipts (5) $ 412,800 $ 328,975 25%
Line of credit - unused portion at period end 323,812 435,500 -26%
(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
2015 2014 2014 2014 2014
EARNINGS (in thousands)
Income recognized on finance receivables, net $ 228,403 $ 222,660 $ 224,326 $ 182,518 $ 177,970
Fee income 13,053 22,800 12,757 14,510 15,608
Other revenue 3,750 5,271 1,890 315 344
Total revenues 245,206 250,731 238,973 197,343 193,922
Operating expenses 149,040 140,871 150,784 124,906 122,340
Income from operations 96,166 109,860 88,189 72,437 71,582
Net interest expense 14,776 13,493 11,807 5,067 4,859
Net income 58,135 46,991 51,167 37,507 40,840
PERIOD-END BALANCES (in thousands)
Cash and cash equivalents $ 40,542 $ 39,661 $ 70,300 $ 270,526 $ 191,819
Finance receivables, net 1,954,772 2,001,790 1,913,710 1,219,595 1,253,961
Goodwill and intangible assets, net 506,695 538,378 606,716 118,927 118,800
Total assets 2,700,613 2,778,751 2,757,429 1,695,362 1,642,613
Borrowings 1,479,262 1,482,456 1,425,409 448,785 450,278
Total liabilities 1,883,295 1,876,536 1,797,569 743,106 732,395
Total equity 817,318 902,215 959,860 952,256 910,218
FINANCE RECEIVABLE COLLECTIONS (dollars in thousands)
Cash collections $ 399,747 $ 373,428 $ 372,743 $ 319,274 $ 313,367
Cash collections on fully amortized pools 17,005 17,785 17,105 16,943 16,516
Principal amortization without allowance (reversals)/charges 169,714 149,753 150,115 139,055 137,350
Allowance (reversal)/charge 1,630 1,015 (1,698) (2,299) (1,953)
Principal amortization with allowance (reversals)/charges 171,344 150,768 148,417 136,756 135,397
Principal amortization w/ allowance charges as % of cash collections:
Including fully amortized pools 42.9% 40.4% 39.8% 42.8% 43.2%
Excluding fully amortized pools 44.8% 42.4% 41.7% 45.2% 45.6%
Allowance (reversal)/charge to period-end net finance receivables 0.1% 0.1% -0.1% -0.2% -0.2%
PURCHASES OF FINANCE RECEIVABLES (dollars in thousands)
Purchase price - North America core $ 138,498 $ 119,714 $ 118,018 $ 91,904 $ 79,085
Purchase price - North America insolvency 16,437 24,949 38,535 16,187 72,003
Purchase price - Europe core 21,579 123,194 734,803 1,121 1,626
Purchase price - Europe insolvency 8,510 11,625 -- -- --
Purchase price - total 185,024 279,482 891,356 109,212 152,714
Number of portfolios - total 139 142 125 85 104
ESTIMATED REMAINING COLLECTIONS (in thousands)
Estimated remaining collections - Americas core $ 2,370,086 $ 2,229,403 $ 2,089,253 $ 1,948,414 $ 1,891,511
Estimated remaining collections - Americas insolvency 577,319 642,552 697,662 733,176 793,855
Estimated remaining collections - Europe core 1,619,454 1,478,738 1,582,135 20,349 19,358
Estimated remaining collections - Europe insolvency 24,838 15,021 -- -- --
Estimated remaining collections - total 4,591,697 4,365,714 4,369,050 2,701,939 2,704,724
Adjusted estimated remaining collections (7) 4,716,230 4,437,264 -- -- --
SHARE DATA-ADJUSTED (7) (share amounts in thousands)
Net income per common share - diluted $ 1.19 $ 0.93 $ 1.01 $ 0.74 $ 0.81
Weighted average number of shares outstanding - diluted 49,052 50,444 50,439 50,437 50,363
Shares repurchased 1,478 574 -- -- --
Average price paid per share repurchased (including acquisitions costs) $ 52.65 $ 57.79 $ -- $ -- $ --
Closing market price $ 54.32 $ 57.93 $ 52.23 $ 59.53 $ 57.86
RATIOS AND OTHER DATA (dollars in thousands)
Return on average equity (1) 30.1% 20.2% 21.1% 16.0% 18.2%
Return on revenue (2) 23.7% 18.7% 21.4% 19.0% 21.1%
Return on average assets (3) 8.7% 6.9% 7.3% 9.0% 10.0%
Operating margin (4) 39.2% 43.8% 36.9% 36.7% 36.9%
Operating expense to cash receipts (5) 36.1% 35.6% 39.1% 37.4% 37.2%
Debt to equity (6) 181.0% 164.3% 148.5% 47.1% 49.5%
Number of collectors 2,395 2,457 2,498 2,258 2,379
Number of full-time equivalent employees 3,847 3,880 3,913 3,567 3,621
Cash receipts (5) $ 412,800 $ 396,228 $ 385,500 $ 333,784 $ 328,975
Line of credit - unused portion at period end 323,812 352,926 513,800 650,000 435,500
(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
(7) Equals total estimated remaining collections on our owned finance receivable portfolios plus the estimated remaining collections on certain of our other investments.

CONTACT: Investor Contact: Darby Schoenfeld Director of Investor Relations (757) 431-7913 DCSchoenfeld@PRAGroup.com News Media Contact: Nancy Porter Vice President, Corporate Communications (757) 431-7950 NAPorter@PRAGroup.com

Source:PRA Group