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PRA Group Reports Third Quarter 2016 Results

NORFOLK, Va., Nov. 07, 2016 (GLOBE NEWSWIRE) -- PRA Group, Inc. (Nasdaq:PRAA), a global leader in acquiring and collecting nonperforming loans, today reported its financial results for the third quarter of 2016. The company reported diluted earnings per share of $0.74 versus $0.36 in the third quarter of 2015 and non-GAAP diluted earnings per share of $0.68 for the third quarter of 2016 compared to $0.85 for the year-ago quarter. Non-GAAP financial results are presented in constant currency with the third quarter of 2015 and exclude items unrelated to normal operations. A reconciliation of all non-GAAP financial measures to the most directly comparable GAAP financial measure can be found at the end of this press release.

Third Quarter Highlights

  • Estimated remaining collections of $5.25 billion.
  • Cash collections of $371.7 million, currency adjusted cash collections of $377.0 million.
  • Total revenues of $222.0 million, currency adjusted revenues of $224.2 million.
  • Income from operations of $67.5 million, non-GAAP income from operations of $69.8 million.
  • Net income of $34.3 million, non-GAAP net income of $31.7 million.
  • Return on average equity, annualized, of 15.1%, non-GAAP return on average equity, annualized, of 14.0%.
  • $161.3 million in investments.

“We continue to evolve the Company in a number of areas including normalizing operations in the U.S. legal collection channel despite increased documentation requirements. Italy is progressing well. We have significantly strengthened the leadership team there and we are beginning to see positive signs of return on our investment in the legal collection channel. Although we still have work to do, we are pleased with the progress the team has been able to achieve in 2016,” said Steve Fredrickson, chairman and chief executive officer, PRA Group. “From an investment perspective, we also continue to deploy capital at good returns, especially in the US and Brazil, and maintain strong relationships with global sellers of nonperforming loans, providing them with a compliant and responsible global partner.”

REVENUES AND CASH COLLECTIONS

  • Total revenues of $222.0 million in the third quarter included finance receivables income net of principal amortization and net allowance charges versus $229.4 million in the prior year period. For the nine months ended September 30, 2016, total revenues were $675.3 million versus $711.8 million in the prior year period.
  • Cash collections in the third quarter were $371.7 million versus $380.8 million in the prior year period. Cash collections for the first nine months of 2016 were $1,143.2 million versus $1,170.1 million in the prior year period. Both GAAP and currency adjusted cash collections are reported below and were comprised of collections from these finance receivables sources:

Cash Collection Source 2016 2015
($ in thousands)Q3Q2Q1 Q4Q3
Americas-Core$ 210,524 $ 213,741 $ 219,571 $ 195,834 $ 210,725
Americas-Insolvency 60,429 67,745 68,646 73,843 81,865
Europe-Core 96,028 102,972 94,091 97,149 85,635
Europe-Insolvency 4,719 2,744 2,025 2,545 2,528
Total Cash Collections$ 371,700 $ 387,202 $ 384,333 $ 369,371 $ 380,753
Cash Collection Source -
Constant Currency Adjusted 2016 2015
($ in thousands)Q3 Q3
Americas-Core$ 208,962 $ 210,725
Americas-Insolvency 60,445 81,865
Europe-Core 102,470 85,635
Europe-Insolvency 5,171 2,528
Total Cash Collections$ 377,048 $ 380,753

  • Principal amortization of finance receivables in the third quarter was $169.1 million or 45.5% of cash collections, compared with $172.6 million or 45.3% in the prior year period. Principal amortization included a net allowance charge of $13.1 million recorded against certain pools of finance receivables in the quarter, compared with a net allowance charge of $11.3 million recorded in the prior year period. Principal amortization of finance receivables for the first nine months of 2016 was $530.1 million or 46.4% of cash collections, including a net allowance charge of $36.0 million compared with $513.5 million or 43.9%, including a net allowance charge of $17.9 million in the prior year period.
  • Revenues for the third quarter were negatively impacted by two portfolios in Italy being on non-accrual which applied all cash collections of $6.1 million to principal amortization during this seasonally weak period.
  • Revenues in the third quarter also included income from PRA Group’s fee-based businesses of $17.6 million, compared with $17.8 million in the prior year period, and other income of $1.7 million compared with $3.4 million in the prior year period. For the first nine months of 2016, fee income was $56.2 million compared with $44.7 million in the prior year period and other income was $6.0 million compared with $10.4 million in the prior year period.

EXPENSES AND OPERATING INCOME

  • Operating expenses were $154.5 million in the third quarter, compared with $175.3 million in the prior year period. Non-GAAP operating expenses were $154.4 million, compared with $144.4 million in the prior year period. For the first nine months of 2016, operating expenses were $464.2 million, compared with $472.7 million in the prior year period and non-GAAP operating expenses were $463.5 million, compared with $438.2 million in the prior year period.
  • Operating income in the third quarter was $67.5 million, compared with $54.1 million in the prior year period. Non-GAAP operating income was $69.8 million, compared with $85.0 million in the prior year period. For the first nine months of 2016, operating income was $211.1 million versus $239.2 million in the prior year period and non-GAAP operating income was $219.3 million, compared with $273.6 million in the prior year period. The operating margin was 30.4% in the third quarter and 31.3% for the first nine months of 2016.
  • The provision for income taxes was $16.7 million in the third quarter compared to $16.6 million in the prior year period. For the first nine months of 2016, the provision for income taxes was $50.2 million, or 32.1% of income before taxes, compared to $74.2 million, or 36.9% of income before taxes, in the prior year period.

NET INCOME AND EPS

  • Net income was $34.3 million in the third quarter, compared with $17.4 million in the prior year period. The net income margin in the third quarter of 2016 was 16.5%. Non-GAAP net income was $31.7 million, compared with $41.4 million in the prior year period. For the first nine months of 2016, net income was $102.7 million, compared with $127.0 million in the prior year period and non-GAAP net income was $109.5 million, compared with $153.6 million in the prior year period. The net income margin for the first nine months of 2016 was 15.7%.
  • Earnings per diluted share in the third quarter were $0.74, compared with $0.36 in the prior year period. Non-GAAP earnings per diluted share were $0.68, compared with $0.85 in the prior year period. For the first nine months of 2016, earnings per diluted share were $2.21 versus $2.61 in the prior year period and non-GAAP earnings per diluted share were $2.36, compared with $3.15 in the prior year period.

PORTFOLIO ACQUISITIONS

  • PRA Group invested $161.3 million in new finance receivables in the third quarter of 2016.

Portfolio Purchase Source 2016 2015
($ in thousands)Q3Q2Q1 Q4Q3
Americas-Core$ 95,452 $ 130,529 $ 136,057 $ 120,554 $ 90,912
Americas-Insolvency 16,760 33,723 22,952 20,589 9,300
Europe-Core 34,240 68,835 171,038 79,735 240,385
Europe-Insolvency 14,803 16,410 6,731 4,976 3,959
Total Portfolio Purchasing$ 161,255 $ 249,497 $ 336,778 $ 225,854 $ 344,556

BALANCE SHEET

  • Cash and cash equivalents were $91.8 million as of September 30, 2016, compared with $69.1 million as of September 30, 2015.
  • Net deferred tax liabilities were $271.2 million as of September 30, 2016, compared with $267.6 million as of September 30, 2015.
  • Borrowings totaled $1.82 billion as of September 30, 2016, compared with $1.65 billion as of September 30, 2015.
  • Equity attributable to PRA Group, Inc. was $937.7 million as of September 30, 2016, compared with $863.5 million as of September 30, 2015.

Conference Call Information
PRA Group will hold a conference call today at 5:00 p.m. ET to discuss the company’s third quarter results. 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 7245944. To listen to a replay of the call until November 14, 2016, call 855-859-2056 in the U.S. or 404-537-3406 outside the U.S. and use conference ID 7245944.

About PRA Group
As a global leader in acquiring and collecting nonperforming loans, PRA Group (Nasdaq:PRAA) returns capital to banks and other creditors to help expand financial services for consumers in the Americas and Europe. With almost 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 business and government clients. 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, beliefs, expectations, 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 Group 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 Nine Months Ended
September 30, September 30,
2016 2015 2016 2015
Revenues:
Income recognized on finance receivables, net$202,639 208,184 $613,154 $656,651
Fee income 17,597 17,803 56,210 44,734
Other revenue 1,748 3,443 5,958 10,448
Total revenues 221,984 229,430 675,322 711,833
Operating expenses:
Compensation and employee services 65,898 66,084 197,456 199,675
Legal collection fees 9,309 13,715 37,357 41,520
Legal collection costs 24,137 18,879 60,118 59,289
Agency fees 12,034 7,961 34,227 24,006
Outside fees and services 14,731 12,583 46,415 37,846
Communication 7,814 8,021 26,119 26,512
Rent and occupancy 3,875 3,684 11,709 10,723
Depreciation and amortization 6,184 5,413 18,339 14,939
Other operating expenses 10,514 38,963 32,444 58,151
Total operating expenses 154,496 175,303 464,184 472,661
Income from operations 67,488 54,127 211,138 239,172
Other income and (expense):
Interest expense (19,310) (16,787) (59,838) (45,015)
Foreign exchange gain/(loss) 5,004 (3,160) 5,183 7,213
Income before income taxes 53,182 34,180 156,483 201,370
Provision for income taxes 16,664 16,597 50,244 74,227
Net income$ 36,518 $17,583 $106,239 $127,143
Adjustment for net income attributable to noncontrolling interest 2,212 187 3,494 187
Net income attributable to PRA Group, Inc.$ 34,306 $17,396 $102,745 $126,956
Net income per common share attributable to PRA Group, Inc.:
Basic $ 0.74 $ 0.36 $ 2.22 $ 2.62
Diluted $ 0.74 $ 0.36 $ 2.21 $ 2.61
Weighted average number of shares outstanding:
Basic 46,343 48,265 46,307 48,438
Diluted 46,434 48,498 46,403 48,693


PRA Group, Inc.
Unaudited Consolidated Balance Sheets
(in thousands)
September 30, December 31,
ASSETS 2016 2015
Cash and cash equivalents$ 91,791 $ 71,372
Investments 67,050 73,799
Finance receivables, net 2,392,408 2,202,113
Other receivables, net 24,299 30,771
Income taxes receivable 10,673 1,717
Net deferred tax asset 19,453 13,068
Property and equipment, net 44,354 45,394
Goodwill 560,505 495,156
Intangible assets, net 31,539 23,788
Other assets 37,275 33,389
Total assets$ 3,279,347 $ 2,990,567
LIABILITIES AND EQUITY
Liabilities:
Accounts payable$ 2,808 $ 4,190
Accrued expenses 86,531 95,380
Income taxes payable 20,242 21,236
Net deferred tax liability 271,152 261,498
Interest-bearing deposits 88,719 46,991
Borrowings 1,816,600 1,717,129
Other liabilities 5,317 4,396
Total liabilities 2,291,369 2,150,820
Equity:
Preferred stock, par value $0.01, authorized shares, 2,000,
issued and outstanding shares, 0 - -
Common stock, par value $0.01, authorized shares, 100,000, issued
and outstanding shares, 46,344 at September 30, 2016; 100,000
authorized shares, 46,173 issued and outstanding shares at 463 462
December 31, 2015
Additional paid-in capital 70,112 64,622
Retained earnings 1,067,015 964,270
Accumulated other comprehensive loss (199,888) (228,861)
Total stockholders' equity - PRA Group, Inc. 937,702 800,493
Noncontrolling interest 50,276 39,254
Total equity 987,978 839,747
Total liabilities and total equity$ 3,279,347 $ 2,990,567


PRA Group, Inc.
FINANCIAL HIGHLIGHTS
As of and for the As of and for the
Three Months Ended September 30, Nine Months Ended September 30,
2016 2015 Change 2016 2015 Change
EARNINGS (in thousands)
Income recognized on finance receivables, net$ 202,639 $ 208,184 -3% $ 613,154 $ 656,651 -7%
Fee income 17,597 17,803 -1% 56,210 44,734 26%
Other revenue 1,748 3,443 -49% 5,958 10,448 -43%
Total revenues 221,984 229,430 -3% 675,322 711,833 -5%
Operating expenses 154,496 175,303 -12% 464,184 472,661 -2%
Income from operations 67,488 54,127 25% 211,138 239,172 -12%
Net interest expense 19,310 16,787 15% 59,838 45,015 33%
Net income 36,518 17,583 108% 106,239 127,143 -16%
Net income attributable to PRA Group, Inc. 34,306 17,396 97% 102,745 126,956 -19%
PERIOD-END BALANCES (in thousands)
Cash and cash equivalents$ 91,791 $ 69,111 33% $ 91,791 $ 69,111 33%
Finance receivables, net 2,392,408 2,167,178 10% 2,392,408 2,167,178 10%
Goodwill and intangible assets, net 592,044 526,841 12
% 592,044 526,841 12%
Total assets 3,279,347 2,984,550 10% 3,279,347 2,984,550 10%
Borrowings 1,816,600 1,654,457 10% 1,816,600 1,654,457 10%
Total liabilities 2,291,369 2,083,131 10% 2,291,369 2,083,131 10%
Total equity - PRA Group, Inc. 937,702 863,517 9% 937,702 863,517 9%
FINANCE RECEIVABLE INCOME (dollars in thousands)
Cash collections$ 371,700 $ 380,753 -2% $ 1,143,235 $ 1,170,124 -2%
Cash collections on fully amortized pools 7,744 11,453 -32% 25,144 43,620 -42%
Principal amortization without allowance (reversals)/charges 155,915 161,234 -3% 494,117 495,623 0%
Allowance (reversal)/charge 13,146 11,335 16% 35,964 17,850 101%
Principal amortization with allowance (reversals)/charges 169,061 172,569 -2% 530,081 513,473 3%
Principal amortization w/ allowance charges as % of cash collections:
Including fully amortized pools 45.5% 45.3% 0% 46.4% 43.9% 6%
Excluding fully amortized pools 46.5% 46.7% -1% 47.4% 45.6% 4%
Allowance (reversal)/charge to period-end net finance receivables 0.5% 0.5% 5% 1.5% 0.8% 83%
PURCHASES OF FINANCE RECEIVABLES (dollars in thousands)
Purchase price - Americas core$ 95,452 $ 90,912 5% $ 362,038 $ 327,727 10%
Purchase price - Americas insolvency 16,760 9,300 80% 73,435 44,848 64%
Purchase price - Europe core 34,240 240,385 -86% 274,113 350,463 -22%
Purchase price - Europe insolvency 14,803 3,959 274% 37,944 14,919 154%
Purchase price - total 161,255 344,556 -53% 747,530 737,957 1%
Number of portfolios - total 122 128 -5% 397 403 -1%
ESTIMATED REMAINING COLLECTIONS (in thousands)
Estimated remaining collections - Americas core$ 2,672,427 $ 2,421,506 10% $ 2,672,427 $ 2,421,506 10%
Estimated remaining collections - Americas insolvency 356,363 474,097 -25% 356,363 474,097 -25%
Estimated remaining collections - Europe core 2,148,230 1,903,226 13% 2,148,230 1,903,226 13%
Estimated remaining collections - Europe insolvency 72,919 30,081 142% 72,919 30,081 142%
Estimated remaining collections - total 5,249,939 4,828,910 9% 5,249,939 4,828,910 9%
Adjusted estimated remaining collections (7) 5,345,657 4,945,609 8% 5,345,657 4,945,609 8%
SHARE DATA (share amounts in thousands)
Net income per common share - diluted$ 0.74 $ 0.36 106% $ 2.21 $ 2.61 -15%
Weighted average number of shares outstanding - diluted 46,434 48,498 -4% 46,403 48,693 -5%
Shares repurchased - 133 -100% - 1,611 -100%
Average price paid per share repurchased (including acquisitions costs)$ - 58.08 -100% $ - 53.10 -100%
Closing market price$ 34.54 $ 52.92 -35% $ 34.54 $ 52.92 -35%
RATIOS AND OTHER DATA (dollars in thousands)
Return on average equity (1) 15.1% 7.8% 95% 15.6% 19.9% -22%
Return on revenue (2) 16.5% 7.7% 115% 15.7% 17.9% -12%
Return on average assets (3) 4.2% 2.3% 81% 4.2% 6.0% -31%
Operating margin (4) 30.4% 23.6% 29% 31.3% 33.6% -7%
Operating expense to cash receipts (5) 39.7% 44.0% -10% 38.7% 38.9% -1%
Debt to stockholders'equity (6) 193.7% 191.6% 1% 193.7% 191.6% 1%
Number of full-time equivalent collectors 2,083 2,159 -4% 2,083 2,159 -4%
Number of full-time equivalent employees 3,859 3,715 4% 3,859 3,715 4%
Cash receipts (5)$ 389,297 $ 398,556 -2% $ 1,199,445 $ 1,214,858 -1%
Lines of credit - unused portion at period end 630,775 393,246 60% 630,775 393,246 60%
(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
September 30June 30March 31December 31September 30
2016 2016 2016 2015 2015
EARNINGS (in thousands)
Income recognized on finance receivables, net$ 202,639 $ 204,008 $ 206,507 $ 208,471 $ 208,184
Fee income 17,597 22,347 16,266 19,649 17,803
Other revenue 1,748 2,101 2,109 2,065 3,443
Total revenues 221,984 228,456 224,882 230,185 229,430
Operating expenses 154,496 155,700 153,988 159,013 175,303
Income from operations 67,488 72,756 70,894 71,172 54,127
Net interest expense 19,310 20,569 19,959 15,321 16,787
Net income 36,518 36,868 32,853 40,988 17,583
Net income attributable to PRA Group, Inc. 34,306 36,456 31,983 40,970 17,396
PERIOD-END BALANCES (in thousands)
Cash and cash equivalents$ 91,791 $ 117,071 $ 79,442 $ 71,372 $ 69,111
Finance receivables, net 2,392,408 2,399,949 2,377,077 2,202,113 2,167,178
Goodwill and intangible assets, net 592,044 576,992 557,024 518,944 526,841
Total assets 3,279,347 3,305,596 3,268,833 2,990,567 2,984,550
Borrowings 1,816,600 1,912,283 1,896,424 1,717,129 1,654,457
Total liabilities 2,291,369 2,370,415 2,360,091 2,150,820 2,083,131
Total equity - PRA Group, Inc. 937,702 886,077 864,868 800,493 863,517
FINANCE RECEIVABLE COLLECTIONS (dollars in thousands)
Cash collections$ 371,700 $ 387,202 $ 384,333 $ 369,371 $ 380,753
Cash collections on fully amortized pools 7,744 8,124 9,276 8,280 11,453
Principal amortization without allowance (reversals)/charges 155,915 170,274 167,928 149,381 161,234
Allowance (reversal)/charge 13,146 12,920 9,898 11,519 11,335
Principal amortization with allowance (reversals)/charges 169,061 183,194 177,826 160,900 172,569
Principal amortization w/ allowance charges as % of cash collections:
Including fully amortized pools 45.5% 47.3% 46.3% 43.6% 45.3%
Excluding fully amortized pools 46.5% 48.3% 47.4% 44.6% 46.7%
Allowance (reversal)/charge to period-end net finance receivables 0.5% 0.5% 0.4% 0.5% 0.5%
PURCHASES OF FINANCE RECEIVABLES (dollars in thousands)
Purchase price - North America core$ 95,452 $ 130,529 $ 136,057 $ 120,554 $ 90,912
Purchase price - North America insolvency 16,760 33,723 22,952 20,589 9,300
Purchase price - Europe core 34,240 68,835 171,038 79,735 240,385
Purchase price - Europe insolvency 14,803 16,410 6,731 4,976 3,959
Purchase price - total 161,255 249,497 336,778 225,854 344,556
Number of portfolios - total 122 136 139 139 128
ESTIMATED REMAINING COLLECTIONS (in thousands)
Estimated remaining collections - Americas core$ 2,672,427 $ 2,705,781 $ 2,643,410 $ 2,558,529 $ 2,421,506
Estimated remaining collections - Americas insolvency 356,363 396,667 421,866 448,652 474,097
Estimated remaining collections - Europe core 2,148,230 2,171,542 2,152,403 1,964,763 1,903,226
Estimated remaining collections - Europe insolvency 72,919 59,107 40,938 34,878 30,081
Estimated remaining collections - total 5,249,939 5,333,097 5,258,617 5,006,822 4,828,910
Adjusted estimated remaining collections (7) 5,345,657 5,430,192 5,366,417 5,114,923 4,945,609
SHARE DATA (share amounts in thousands)
Net income per common share - diluted$ 0.74 $ 0.79 $ 0.69 $ 0.86 $ 0.36
Weighted average number of shares outstanding - diluted 46,434 46,402 46,372 47,539 48,498
Shares repurchased - - - 2,072 133
Average price paid per share repurchased (including acquisitions costs) $- $ - $ - $ 38.60 $ 58.08
Closing market price$ 34.54 $ 24.14 $ 29.39 $ 34.69 $ 52.92
RATIOS AND OTHER DATA (dollars in thousands)
Return on average equity (1) 15.1% 16.4% 15.4% 19.8% 7.8%
Return on revenue (2) 16.5% 16.1% 14.6% 17.8% 7.7%
Return on average assets (3) 4.2% 4.4% 4.1% 5.5% 2.3%
Operating margin (4) 30.4% 31.8% 31.5% 30.9% 23.6%
Operating expense to cash receipts (5) 39.7% 38.0% 38.4% 40.9% 44.0%
Debt to stockholders'equity (6) 193.7% 215.8% 219.3% 214.5% 191.6%
Number of collectors 2,083 2,023 2,103 2,173 2,159
Number of full-time equivalent employees 3,859 3,816 3,748 3,799 3,715
Cash receipts (5)$ 389,297 $ 409,549 $ 400,599 $ 389,020 $ 398,556
Lines of credit - unused portion at period end 630,775 430,651 435,709 446,769 393,246
(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.

Use of Non-GAAP Financial Measures
PRA Group, Inc. reports financial results in accordance with U.S. generally accepted accounting principles (GAAP). However, the Company believes certain non-GAAP financial measures and ratios, which exclude penalty and redress associated with the Consumer Financial Protection Bureau consent order, expenses associated with acquisitions, legal costs not associated with normal operations, one-time tax items and constant currency adjustments, improve comparability between current year results and prior periods and better reflect the Company’s operational performance. In all periods presented, the Company adjusted the income tax provision by excluding the tax impact of the non-GAAP adjustments discussed above in non-GAAP financial measures. Management uses non-GAAP financial measures internally to evaluate the Company’s performance and to set performance goals. Reconciliations from non-GAAP to the most directly comparable GAAP financial measures are provided below. These non-GAAP financial measures should be viewed in addition to, not as an alternative for reported GAAP results.

The constant currency results assume that foreign revenues and expenses are translated from foreign currencies to the U.S. Dollar at rates consistent with the prior year, and that any benefit or loss caused by foreign currency fluctuations would be consistent with the prior year. To do this the Company translates the current year’s income statements into U.S. Dollars using the prior year’s average exchange rates and then replaces the foreign exchange gain or loss for the current year with the balance from the prior year. Finally, the Company calculates the tax impact of the constant currency results to reflect the current effective tax rate of the reporting period.

Three Months Ended September 30, 2016
Net Income Average Equity Return on Average
Equity, Annualized

As Reported $ 34,306 $ 907,797 15.1%
Adjustments (2,653) (884) -1.1%
As Adjusted 31,653 906,913 14.0%
Nine Months Ended September 30, 2016
Net Income Average Equity Return on Average
Equity, Annualized

As Reported $ 102,745 $ 875,585 15.6%
Adjustments 6,735 748 1.1%
As Adjusted 109,480 876,333 16.7%
Three Months Ended September 30, 2015
Net Income Average Equity Return on Average
Equity, Annualized

As Reported $ 17,396 $ 897,043 7.8%
Adjustments 24,042 8,014 10.5%
As Adjusted 41,438 905,057 18.3%
Nine Months Ended September 30, 2015
Net Income Average Equity Return on Average
Equity, Annualized
As Reported $ 126,956 $ 848,602 19.9%
Adjustments 26,655 2,961 4.1%
As Adjusted 153,611 851,563 24.1%


Three Months Ended September 30, 2016
Total
Revenues
Total Operating
Expenses
Income from
Operations
Provision for
Income Taxes
Net Income
attributable to PRA
Group, Inc.
Diluted
EPS
As Reported$ 221,984 $ 154,496 $ 67,488 $ 16,664 $ 34,306 $ 0.74
Adjustments:
CFPB expenses including penalty and redress - (20) 20 8 12 -
Acquisition-related expenses - (216) 216 84 132 -
One-time tax items - - - (1,383) 1,383 0.03
Legal costs not associated with normal operations - (1,511) 1,511 584 927 0.02
Constant currency adjustments 2,216 1,620 596 (4,597) (5,107) (0.11)
Subtotal of adjustments 2,216 (127) 2,343 (5,304) (2,653) (0.06)
As Adjusted 224,200 154,369 69,831 11,360 31,653 0.68
Nine Months Ended September 30, 2016
Total
Revenues
Total Operating
Expenses
Income from
Operations
Provision for
Income Taxes
Net Income
attributable to PRA
Group, Inc.
Diluted
EPS
As Reported$ 675,322 $ 464,184 $ 211,138 $ 50,244 $ 102,745 $ 2.21
Adjustments:
CFPB expenses including penalty and redress - (93) 93 34 59 -
Acquisition-related expenses - (1,807) 1,807 661 1,146 0.03
One-time tax items - - - (1,383) 1,383 0.03
Legal costs not associated with normal operations - (3,569) 3,569 1,305 2,264 0.05
Constant currency adjustments 7,487 4,749 2,738 (957) 1,882 0.04
Subtotal of adjustments 7,487 (720) 8,207 (340) 6,734 0.15
As Adjusted 682,809 463,464 219,345 49,904 109,479 2.36
Three Months Ended September 30, 2015
Total
Revenues
Total Operating
Expenses
Income from
Operations
Provision for
Income Taxes
Net Income
attributable to PRA
Group, Inc.
Diluted
EPS
As Reported$ 229,430 $ 175,303 $ 54,127 $ 16,597 $ 17,396 $ 0.36
Adjustments:
CFPB expenses including penalty and redress - (28,806) 28,806 8,262 20,544 0.42
Acquisition-related expenses - (802) 802 230 572 0.01
One-time tax items - - - (2,026) 2,026 0.04
Legal costs not associated with normal operations - (1,262) 1,262 362 900 0.02
Subtotal of adjustments - (30,870) 30,870 6,828 24,042 0.49
As Adjusted 229,430 144,433 84,997 23,425 41,438 0.85
Nine Months Ended September 30, 2015
Total
Revenues
Total Operating
Expenses
Income from
Operations
Provision for
Income Taxes
Net Income
attributable to PRA
Group, Inc.
Diluted
EPS
As Reported$ 711,833 $ 472,661 $ 239,172 $ 74,227 $ 126,956 $ 2.61
Adjustments:
CFPB expenses including penalty and redress - (28,806) 28,806 8,220 20,586 0.42
Acquisition-related expenses - (3,988) 3,988 1,138 2,850 0.06
One-time tax items - - - (2,026) 2,026 0.04
Legal costs not associated with normal operations - (1,669) 1,669 476 1,193 0.02
Subtotal of adjustments - (34,463) 34,463 7,808 26,655 0.54
As Adjusted 711,833 438,198 273,635 82,035 153,611 3.15


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, Inc.