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) | Q3 | Q2 | Q1 | Q4 | Q3 | |||||||||||
| 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) | Q3 | Q2 | Q1 | Q4 | Q3 | |||||||||||
| 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 30 | June 30 | March 31 | December 31 | September 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 | ||||||||||||||||||