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PRA Group Reports First Quarter 2017 Results

NORFOLK, Va., May 09, 2017 (GLOBE NEWSWIRE) -- 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 Q4Q3Q2Q1
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 Q4Q3Q2Q1
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 31December 31September 30June 30March 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

Source:PRA Group, Inc.