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PRA Group Reports Third Quarter 2017 Results

NORFOLK, Va., Nov. 08, 2017 (GLOBE NEWSWIRE) -- PRA Group (Nasdaq:PRAA), a global leader in acquiring and collecting nonperforming loans, today reported its financial results for the third quarter of 2017. The company reported net income of $15.6 million in the third quarter, compared with $34.3 million in the prior year period. Diluted earnings per share were $0.34 versus $0.74 in the third quarter of 2016.

Third Quarter Business Highlights

  • Increased cash collections 3% compared with the third quarter of 2016.
    • Europe Core cash collections increased 7%.
    • Global Insolvency collections increased 2%, U.S. Insolvency collections increased 2% versus the prior year quarter and 14% sequentially.
    • Americas Core cash collections increased 1%.
  • Investment in portfolios increased 31% versus the prior year quarter, with a year-to-date total of $734.4 million.
  • The total number of collectors remained constant with last quarter since the Company was at capacity in the current call centers. However, the Company has announced two new call centers in Henderson, Nevada and Burlington, North Carolina, as well as expansions at existing sites in Virginia. This will add capacity for almost 1,000 new collectors and will be utilized to service the growth in purchases of nonperforming loans the Company is expecting.

Third Quarter Financial Highlights

  • Investment in portfolios of $210.9 million versus $161.3 million in the prior year quarter.
  • Estimated remaining collections of $5.4 billion which increased $174 million from the prior year quarter and $100 million sequentially.
  • Cash collections of $381.8 million versus $371.7 million in the prior year quarter.
  • Net finance receivable revenue of $197.2 million versus $202.6 million in the prior year quarter.
  • Income from operations of $54.3 million versus $67.5 million in the prior year quarter.
  • Net income of $15.6 million versus $34.3 million in the prior year quarter.

“PRA continues to deliver from an operational perspective in both Europe and the Americas and cash collections increased 3% from the same period last year. In Europe, we have seen additional improvement in cash collections from operational enhancements including investment in the legal channel and improved scoring,” said Kevin Stevenson, president and chief executive officer of PRA Group, Inc. “In the U.S., we will be hosting training classes this month in our two new sites and remain optimistic about portfolio supply. We have been investing to prepare for anticipated growth especially in the U.S. and want to make sure we are in the best position possible to help sellers globally with their nonperforming loans.”

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) Q3Q2Q1 Q4Q3
Americas-Core $212,756$217,020$226,906 $193,360$210,524
Americas-Insolvency 60,436 53,163 49,813 52,988 60,429
Europe-Core 102,681 99,121 98,081 97,429 96,028
Europe-Insolvency 5,961 5,371 5,030 4,974 4,719
Total Cash Collections $381,834$374,675$379,830 $348,751$371,700
Cash Collection Source -
Constant Currency Adjusted 2017 2016
($ in thousands) Q3 Q3
Americas-Core $212,756 $211,188
Americas-Insolvency 60,436 60,578
Europe-Core 102,681 99,125
Europe-Insolvency 5,961 4,840
Total Cash Collections $381,834 $375,731

  • Cash collections in the quarter increased 3% versus the prior year quarter. This marks the first quarter in three and a half years that Americas Insolvency cash collections have grown year over year. U.S. call center cash collections increased 7% primarily due to hiring additional collectors and portfolio acquisitions.
  • Net finance receivable revenue was lower than the prior year quarter due in large part to the attrition of higher yielding Insolvency portfolios. This was partially offset by significant portfolio investment thus far in the year and yield increases on certain pools.
  • The reduction in fee income is primarily the result of the sale of two of three fee based subsidiaries earlier in the year.

Expenses

  • Operating expenses decreased from the previous year largely due to decreased legal collection expense and agency fees. The decline in legal collection expense resulted primarily from fewer accounts in the legal channel during the quarter. The decline in agency fees is primarily the result of the sale of PRA Location Services.
  • The Company recorded $5.3 million in pre-tax, noncash interest expense and amortization of issuance costs, a $1.0 million gain on interest rate swap agreements, and $1.0 million in amortization of intangible assets.
  • The year to date effective tax rate was 39.7% compared with 32.2% for the full year 2016. Changes in the effective tax rate were primarily driven by changes in the proportion of income recognized in the U.S. versus other countries.

Portfolio Acquisitions

  • PRA Group invested $210.9 million in new finance receivables in the third quarter.
  • The Company has in place forward flow commitments for the purchase of nonperforming loans over the next twelve months with a maximum purchase price of $413.6 million.

Portfolio Purchase Source 2017 2016
($ in thousands) Q3Q2Q1 Q4Q3
Americas-Core $ 115,572$ 144,871$ 115,166 $ 91,800$ 95,452
Americas-Insolvency 73,497 100,040 67,123 20,929 16,760
Europe-Core 14,695 42,876 39,505 80,129 34,240
Europe-Insolvency 7,146 7,860 6,020 6,943 14,803
Total Portfolio Purchasing $ 210,910$ 295,647$ 227,814 $ 199,801$ 161,255

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 2387408. To listen to a replay of the call until November 15, 2017, call 855-859-2056 in the U.S. or 404-537-3406 outside the U.S. and use conference ID 2387408.

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 Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
Revenues:
Income recognized on finance receivables, net$197,248 $202,639 $582,626 $613,154
Fee income 2,671 17,597 18,873 56,210
Other revenue 1,091 1,748 6,401 5,958
Total revenues 201,010 221,984 607,900 675,322
Operating expenses:
Compensation and employee services 68,541 65,898 203,780 197,456
Legal collection expenses 27,626 33,447 90,556 97,476
Agency fees 7,599 12,034 27,653 34,227
Outside fees and services 15,631 14,731 46,977 46,415
Communication 8,713 7,814 25,104 26,119
Rent and occupancy 3,668 3,875 10,838 11,709
Depreciation and amortization 4,841 6,184 15,097 18,339
Other operating expenses 10,140 10,513 32,071 32,443
Total operating expenses 146,759 154,496 452,076 464,184
Income from operations 54,251 67,488 155,824 211,138
Other income and (expense):
Gain on sale of subsidiaries 307 - 48,474 -
Interest expense, net (25,899) (19,310) (69,662) (59,838)
Foreign exchange (loss)/gain (1,084) 5,004 (1,421) 5,183
Income before income taxes 27,575 53,182 133,215 156,483
Provision for income taxes 10,682 16,664 52,857 50,244
Net income$16,893 $36,518 $80,358 $106,239
Adjustment for net income attributable to noncontrolling interests 1,338 2,212 4,963 3,494
Net income attributable to PRA Group, Inc.$15,555 $34,306 $75,395 $102,745
Net income per common share attributable to PRA Group, Inc.:
Basic $0.34 $0.74 $1.64 $2.22
Diluted $0.34 $0.74 $1.64 $2.21
Weighted average number of shares outstanding:
Basic 45,168 46,343 45,838 46,307
Diluted 45,286 46,434 45,991 46,403

PRA Group, Inc.
Consolidated Balance Sheets
(in thousands)
(unaudited)
September 30, December 31,
ASSETS 2017 2016
Cash and cash equivalents$ 113,754 $ 94,287
Investments 75,512 68,543
Finance receivables, net 2,577,831 2,307,969
Other receivables, net 10,919 11,650
Income taxes receivable 3,877 9,427
Net deferred tax asset 41,183 28,482
Property and equipment, net 36,428 38,744
Goodwill 538,337 499,911
Intangible assets, net 25,527 27,935
Other assets 37,409 33,808
Assets held for sale - 43,243
Total assets$ 3,460,777 $ 3,163,999
LIABILITIES AND EQUITY
Liabilities:
Accounts payable$ 3,605 $ 2,459
Accrued expenses 82,445 82,699
Income taxes payable 4,069 19,631
Net deferred tax liability 237,044 258,344
Interest-bearing deposits 96,395 76,113
Borrowings 1,963,504 1,784,101
Other liabilities 1,213 10,821
Liabilities held for sale - 4,220
Total liabilities 2,388,275 2,238,388
Redeemable noncontrolling interest 8,620 8,448
Equity:
Preferred stock, par value $0.01, authorized shares, 2,000,
issued and outstanding shares, 0 - -
Common stock, par value $0.01, 100,000 shares authorized, 45,169 shares
issued and outstanding at September 30, 2017; 100,000 shares authorized,
46,356 shares issued and outstanding at December 31, 2016 452 464
Additional paid-in capital 52,049 66,414
Retained earnings 1,124,762 1,049,367
Accumulated other comprehensive loss (166,397) (251,944)
Total stockholders' equity - PRA Group, Inc. 1,010,866 864,301
Noncontrolling interest 53,016 52,862
Total equity 1,063,882 917,163
Total liabilities and equity$ 3,460,777 $ 3,163,999

Select Expenses (Income)
(in thousands)Three Months Ended
September 30, 2017June 30, 2017March 31, 2017December 31, 2016September 30, 2016June 30, 2016March 31, 2016
CFPB expenses including penalty and redress$- $- $-$- $20 $21$52
Acquisition/divestiture-related expenses - - 2,100 458 216 557 1,034
Legal costs not associated with normal operations 218 2,615 1,024 3,741 1,511 1,623 435
Noncash interest expense - amortization of debt discount 2,796 1,809 1,155 1,136 1,127 1,109 1,100
Noncash interest expense - amortization of debt issuance costs 2,505 2,635 1,928 1,929 1,647 2,277 2,263
Interest rate swap agreements (1,025) (1,578) 158 (1,064) (669) 1,399 1,557
Amortization of intangibles 1,037 869 1,410 929 1,661 1,808 1,775
Stock-based compensation expense 2,218 1,846 2,199 (3,330) 3,332 2,699 3,437

Purchase Price Multiples
as of September 30, 2017
Amounts in thousands
Purchase
Period
Purchase Price
(1)(3)
Net Finance
Receivables (4)
ERC-
Historical
Period
Exchange
Rates (5)
Total
Estimated
Collections (6)
ERC-Current
Period
Exchange
Rates (7)
Current
Estimated
Purchase
Price Multiple
Original
Estimated
Purchase
Price
Multiple (2)
Americas-Core
1996-2006$ 458,635$ 2,948$ 16,991$ 1,605,551$ 16,991350%246%
2007 179,826 4,862 20,426 442,487 20,426246%227%
2008 166,444 5,088 16,869 374,936 16,869225%220%
2009 125,156 1,089 35,328 461,678 35,328369%252%
2010 148,210 4,720 55,421 539,054 55,421364%247%
2011 209,654 14,337 77,717 723,855 77,717345%245%
2012 254,447 28,508 112,688 678,461 112,688267%226%
2013 391,612 82,257 244,721 971,832 244,721248%211%
2014 405,910 133,709 366,519 980,208 363,541241%204%
2015 445,198 209,558 460,239 951,890 463,015214%205%
2016 456,426 309,426 632,022 964,260 639,433211%201%
2017 377,203 356,961 668,675 728,881 668,889193%193%
Subtotal 3,618,721 1,153,463 2,707,616 9,423,093 2,715,039
Americas-Insolvency
1996-2006 54,396 404 91,147 404168%145%
2007 78,524 79 305 106,067 305135%150%
2008 108,578 469 979 168,971 979156%163%
2009 155,996 3,604 471,952 3,604303%214%
2010 208,963 5,017 548,234 5,017262%184%
2011 180,479 508 366,720 508203%155%
2012 251,471 4,504 386,491 4,504154%136%
2013 227,999 13,703 29,349 347,301 29,349152%133%
2014 148,769 33,306 49,021 210,471 48,975141%124%
2015 63,223 36,365 45,053 81,445 45,053129%125%
2016 92,486 57,870 69,697 112,436 70,216122%123%
2017 236,201 215,968 269,794 294,724 269,795125%125%
Subtotal 1,807,085 357,760 478,235 3,185,959 478,709
Total Americas 5,425,806 1,511,223 3,185,851 12,609,052 3,193,748
Europe-Core
2012 20,451 2,388 37,126 1,966182%187%
2013 20,365 668 1,596 22,933 1,290113%119%
2014 797,808 349,722 1,112,324 2,072,020 1,003,317260%208%
2015 423,412 255,365 497,625 720,188 468,229170%160%
2016 348,867 302,569 488,745 587,387 516,385168%167%
2017 97,295 94,865 140,656 150,084 147,488154%154%
Subtotal 1,708,198 1,003,189 2,243,334 3,589,738 2,138,675
Europe-Insolvency
2014 10,876 2,529 6,608 18,393 6,223169%129%
2015 19,418 8,994 16,654 28,872 15,044149%139%
2016 42,222 30,030 41,601 57,791 42,764137%130%
2017 21,402 21,866 26,793 27,142 27,643127%127%
Subtotal 93,918 63,419 91,656 132,198 91,674
Total Europe 1,802,116 1,066,608 2,334,990 3,721,936 2,230,349
Total PRA Group$ 7,227,922$ 2,577,831$ 5,520,841$ 16,330,988$ 5,424,097
(1) The amount reflected in the Purchase Price also includes the acquisition date finance receivables portfolios that were acquired through our various business acquisitions.
(2) The Original Estimated Purchase Price Multiple represents the purchase price multiple at the end of the year of acquisition.
(3) For our international amounts, Purchase Price is presented at the exchange rate at the end of the quarter in which the pool was purchased. In addition, any purchase price adjustments that occur throughout the life of the pool are presented at the period-end exchange rate for the respective quarter of purchase.
(4) For our international amounts, Net Finance Receivables are presented at the September 30, 2017 exchange rate.
(5) For our international amounts, ERC-Historical Period Exchange Rates is presented at the period-end exchange rate for the respective quarter of purchase.
(6) For our international amounts, TEC is presented at the period-end exchange rate for the respective quarter of purchase.
(7) For our international amounts, ERC-Current Period Exchange Rates is presented at the September 30, 2017 exchange rate.

Portfolio Financial Information
Year-to-date as of September 30, 2017
Amounts in thousands
Purchase PeriodPurchase
Price (1)(3)
Cash
Collections (2)
Gross
Revenue (2)
Amortization (2)Allowance (2)Net Revenue (2)Net Finance
Receivables as of
September 30, 2017 (4)
Americas-Core
1996-2006$458,635$6,116$4,608$1,508$ $4,608$2,948
2007 179,826 4,539 2,997 1,542 330 2,667 4,862
2008 166,444 4,757 2,647 2,110 145 2,502 5,088
2009 125,156 8,724 7,000 1,724 200 6,800 1,089
2010 148,210 12,546 8,813 3,733 8,813 4,720
2011 209,654 25,782 20,386 5,396 285 20,101 14,337
2012 254,447 31,838 20,292 11,546 20,292 28,508
2013 391,612 62,833 43,993 18,840 1,605 42,388 82,257
2014 405,910 90,971 61,881 29,090 1,114 60,767 133,709
2015 445,198 148,469 73,109 75,360 814 72,295 209,558
2016 456,426 199,942 107,138 92,804 288 106,850 309,426
2017 377,203 60,165 39,831 20,334 39,831 356,961
Subtotal 3,618,721 656,682 392,695 263,987 4,781 387,914 1,153,463
Americas-Insolvency
1996-2006 54,396 113 113 113
2007 78,524 148 77 71 77 79
2008 108,578 251 105 146 100 5 469
2009 155,996 1,284 1,284 1,284
2010 208,963 1,966 1,913 53 20 1,893
2011 180,479 3,135 3,135 3,135
2012 251,471 26,053 16,825 9,228 16,825
2013 227,999 37,763 10,210 27,553 10,210 13,703
2014 148,769 28,976 7,818 21,158 (12) 7,830 33,306
2015 63,223 15,106 3,141 11,965 3,141 36,365
2016 92,486 23,686 4,679 19,007 1,030 3,649 57,870
2017 236,201 24,931 4,697 20,234 4,697 215,968
Subtotal 1,807,085 163,412 53,997 109,415 1,138 52,859 357,760
Total Americas 5,425,806 820,094 446,692 373,402 5,919 440,773 1,511,223
Europe-Core
2012 20,451 1,501 1,501 1,501
2013 20,365 911 627 284 62 565 668
2014 797,808 165,299 91,086 74,213 1,070 90,016 349,722
2015 423,412 64,096 24,264 39,832 1,387 22,877 255,365
2016 348,867 58,373 20,856 37,517 840 20,016 302,569
2017 97,295 9,703 2,877 6,826 2,877 94,865
Subtotal 1,708,198 299,883 141,211 158,672 3,359 137,852 1,003,189
Europe-Insolvency
2014 10,876 2,464 1,117 1,347 1,117 2,529
2015 19,418 3,875 1,014 2,861 134 880 8,994
2016 42,222 9,669 1,859 7,810 1,859 30,030
2017 21,402 354 145 209 145 21,866
Subtotal 93,918 16,362 4,135 12,227 134 4,001 63,419
Total Europe 1,802,116 316,245 145,346 170,899 3,493 141,853 1,066,608
Total PRA Group$7,227,922$1,136,339$592,038$544,301$9,412 $582,626$2,577,831
(1) The amount reflected in the Purchase Price also includes the acquisition date finance receivables portfolios that were acquired through our various business acquisitions.
(2) For our international amounts, Cash Collections are presented using the average exchange rates during the current reporting period.
(3) For our international amounts, Purchase Price is presented at the exchange rate at the end of the quarter in which the pool was purchased. In addition, any purchase price adjustments that occur throughout the life of the pool are presented at the period-end exchange rate for the respective quarter of purchase.
(4) For our international amounts, Net Finance Receivables are presented at the September 30, 2017 exchange rate.

Cash Collections by Year, By Year of Purchase (2)
as of September 30, 2017
Amounts in thousands
Purchase PeriodPurchase
Price (1)(3)
Cash Collections
1996-2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Total
Americas-Core
1996-2006$458,635$861,003$195,738$135,589$99,674$77,459$64,555$49,820$35,711$25,488$18,293$11,862$6,116$1,581,308
2007 179,826 39,412 87,039 69,175 60,230 50,996 39,585 28,244 19,759 14,198 8,883 4,539 422,060
2008 166,444 47,253 72,080 62,363 53,654 42,850 31,307 21,027 13,786 8,989 4,757 358,066
2009 125,156 40,703 95,627 84,339 69,385 51,121 35,555 24,896 16,000 8,724 426,350
2010 148,210 47,076 113,554 109,873 82,014 55,946 38,110 24,515 12,546 483,634
2011 209,654 61,971 174,461 152,908 108,513 73,793 48,711 25,782 646,139
2012 254,447 56,901 173,589 146,198 97,267 59,981 31,838 565,774
2013 391,612 101,614 247,849 194,026 120,789 62,833 727,111
2014 405,910 92,660 253,448 170,311 90,971 607,390
2015 445,198 116,951 228,432 148,469 493,852
2016 456,426 138,723 199,942 338,665
2017 377,203 60,165 60,165
Subtotal 3,618,721 861,003 235,150 269,881 281,632 342,755 429,069 542,875 656,508 752,995 844,768 837,196 656,682 6,710,514
Americas-Insolvency
1996-2006 54,396 34,138 24,166 14,822 8,212 4,518 2,141 1,023 678 437 302 193 113 90,743
2007 78,524 2,850 27,972 25,630 22,829 16,093 7,551 1,206 714 500 270 148 105,763
2008 108,578 14,024 35,894 37,974 35,690 28,956 11,650 1,884 1,034 635 251 167,992
2009 155,996 16,635 81,780 102,780 107,888 95,725 53,945 5,781 2,531 1,284 468,349
2010 208,963 39,486 104,499 125,020 121,717 101,873 43,649 5,008 1,966 543,218
2011 180,479 15,218 66,379 82,752 85,816 76,915 35,996 3,135 366,211
2012 251,471 17,388 103,610 94,141 80,079 60,715 26,053 381,986
2013 227,999 52,528 82,596 81,679 63,386 37,763 317,952
2014 148,769 37,045 50,880 44,313 28,976 161,214
2015 63,223 3,395 17,892 15,106 36,393
2016 92,486 18,869 23,686 42,555
2017 236,201 24,931 24,931
Subtotal 1,807,085 34,138 27,016 56,818 86,371 186,587 276,421 354,205 469,866 458,451 344,214 249,808 163,412 2,707,307
Total Americas 5,425,806 895,141 262,166 326,699 368,003 529,342 705,490 897,080 1,126,374 1,211,446 1,188,982 1,087,004 820,094 9,417,821
Europe-Core
2012 20,451 11,604 8,995 5,641 3,175 2,198 1,501 33,114
2013 20,365 7,068 8,540 2,347 1,326 911 20,192
2014 797,808 153,180 291,980 246,365 165,299 856,824
2015 423,412 45,760 100,263 64,096 210,119
2016 348,867 40,368 58,373 98,741
2017 97,295 9,703 9,703
Subtotal 1,708,198 11,604 16,063 167,361 343,262 390,520 299,883 1,228,693
Europe-Insolvency
2014 10,876 5 4,297 3,921 2,464 10,687
2015 19,418 2,954 4,366 3,875 11,195
2016 42,222 6,175 9,669 15,844
2017 21,402 354 354
Subtotal 93,918 5 7,251 14,462 16,362 38,080
Total Europe 1,802,116 11,604 16,063 167,366 350,513 404,982 316,245 1,266,773
Total PRA Group$7,227,922$895,141$262,166$326,699$368,003$529,342$705,490$908,684$1,142,437$1,378,812$1,539,495$1,491,986$1,136,339$10,684,594
(1) The amount reflected in the Purchase Price also includes the acquisition date finance receivables portfolios that were acquired through our various business acquisitions.
(2) For our international amounts, Cash Collections are presented using the average exchange rates during the cash collection period.
(3) For our international amounts, Purchase Price is presented at the exchange rate at the end of the quarter in which the portfolio was purchased. In addition, any purchase price adjustments that occur throughout the life of the pool are presented at the period end exchange rate for the respective quarter of purchase.

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

Source:PRA Group, Inc.