NORFOLK, Va., Feb. 28, 2019 /PRNewswire/ -- PRA Group (Nasdaq: PRAA), a global leader in acquiring and collecting nonperforming loans, today reported its financial results for the fourth quarter and full year of 2018. Net income attributable to PRA Group, Inc. in the fourth quarter of 2018 was $14.9 million compared to $88.9 million in the fourth quarter of 2017. Diluted earnings per share in the fourth quarter of 2018 were $0.33 compared to $1.96 in the fourth quarter of 2017. For the year ended December 31, 2018, net income attributable to PRA Group, Inc. was $65.6 million, or $1.44 in diluted earnings per share, compared to $164.3 million, or $3.59 in diluted earnings per share, during the year ended December 31, 2017. Financial performance in the fourth quarter and full year of 2017 was impacted by a net after-tax benefit of $73.2 million due to the Tax Cuts and Jobs Act.
During the quarter, the Company completed a review of seller contracts in light of recent interpretations of the rules governing revenue recognition on portfolios that do not qualify for sale accounting. As a result, the Company has determined that two contracts in Austria did not meet the recent interpretations, and the Company should have applied different revenue recognition methodology for portfolios acquired under these contracts. The impact of this change is that the Company should have recognized an additional $5.5 million of revenue from 2016 to 2018. Of the $5.5 million, $1.2 million should have been recognized during 2018. These revenue increases were spread over a number of prior years and, although none were material to any individual year, the impact could have been material had the Company reflected the full change in its 2018 results. The conclusion does not impact the economics of the transactions, only the revenue recognition methodology. This press release includes reconciliations from previously reported results to results adjusted for the additional revenue for the three and twelve months ended December 31, 2017. Additionally, all numbers presented herein reflect adjusted results.
As a result of this analysis, the Company experienced unanticipated delays in completing the year end closing process. The Company, and as a result, its auditors, have not fully completed the activities required to complete Form 10-K for the fiscal year ended December 31, 2018. Therefore, the Company is not in a position to file its Form 10-K within the prescribed time period without unreasonable expense and effort. The Company expects to file its Form 10-K within the 15 day period specified by Rule 12b-25 of the Securities Exchange Act of 1934, as amended.
Fourth Quarter Highlights
- Cash collections of $402.7 million, an increase of 7% compared to the fourth quarter of 2017. Cash collections on a currency adjusted basis increased 9% compared to the fourth quarter of 2017.
- Americas Core cash collections increased 15%, or 16% on a currency adjusted basis.
- U.S. legal cash collections increased 24%.
- U.S. call center cash collections increased 12%.
- Europe Core cash collections increased 6%, or 9% on a currency adjusted basis.
- Record quarterly portfolio investment, excluding acquisitions, of $490.9 million driven by Americas Core and Europe Core.
- Record estimated remaining collections of $6.14 billion which increased $331.5 million from the third quarter of 2018.
- Income recognized on finance receivables of $231.0 million compared to $203.4 million in the fourth quarter of 2017.
- Expanded North American revolving credit facility to provide significant additional capacity for investment in the United States.
- Completed a strategic partnership with Banco Bradesco, enhancing the Company's position in Latin America's largest economy, creating additional investment opportunities and maintaining majority ownership of the revenue generating operation for PRA Group. The Company recognized a gain of $26.6 million on the sale of the majority stake in the servicing platform during the fourth quarter.
- Record total cash collections of $1.63 billion, driven by record cash collections in Americas Core, Europe Core and Europe Insolvency.
- Record portfolio investment in Americas Core of $657.1 million, increasing 23% compared to the previous record in 2017.
"The fourth quarter of 2018 culminated a year of exceptional portfolio investment and record cash collections for PRA Group. During the fourth quarter, we invested nearly a half billion dollars, with substantial deployments in Americas Core and in European countries where we have extensive data and operational experience. This increased estimated remaining collections to an all-time high of $6.14 billion," said Kevin Stevenson, president and chief executive officer of PRA Group, Inc. "Total cash collections for the year set a record at $1.63 billion, fueled by growth in Americas Core and Europe Core. U.S call centers delivered an increase of 16% compared to 2017 and we are seeing U.S. legal collections accelerate after the investment in the third and fourth quarters."
Cash Collections, Revenues, and Net Allowance Charges
- The following table presents cash collections by quarter and by source on an as reported and currency-adjusted basis:
- Cash collections in the quarter increased 7%, or 9% on a currency adjusted basis, compared to the fourth quarter of 2017. The increase was largely due to U.S. legal collections increasing 24% and U.S. call center collections increasing 12%. This was partially offset by a 14% decrease in Global Insolvency cash collections primarily due to muted portfolio investment in 2018. For the full year, total cash collections were a record $1.63 billion, an increase of 7% compared to the full year of 2017.
- For the quarter, cash collections on fully amortized pools were $12.0 million and cash collections on nonaccrual pools were $4.1 million.
- Income recognized on finance receivables increased 14% compared to the fourth quarter of 2017 due primarily to Americas Core portfolio investment during 2017 and 2018, Europe Core portfolio investment in 2017 and yield increases in Europe Core. For the full year of 2018, income recognized on finance receivables increased 12% compared to the full year of 2017.
- Net allowance charges in the quarter were $21.4 million primarily due to allowances incurred in the 2013, 2014 and 2015 U.S. Core vintages.
- Fee income and other income in the quarter was $5.7 million.
- Operating expenses in the quarter increased $32.7 million compared to the fourth quarter of 2017 largely due to increased legal collection expenses, as the Company had more accounts qualifying for the legal collection channel and increases in compensation and employee services primarily due to expansion in U.S. collection staff. For the twelve months ended December 31, 2018, operating expenses increased $87.0 million compared to the twelve months ended December 31, 2017.
- During the quarter, the Company recorded $3.0 million in noncash interest expense, $2.7 million in amortization of debt issuance costs, and $0.9 million in amortization of intangible assets. The Company also recorded a $0.7 million loss on the change in fair value on interest rate swap agreements.
- The effective tax rate for the full year of 2018 was 15.4%.
- The Company invested $490.9 million in finance receivables in the fourth quarter.
- The Company had in place forward flow commitments as of the end of 2018 for the purchase of nonperforming loans with a maximum purchase price of $303.7 million.
Conference Call Information
PRA Group, Inc. 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 https://ir.pragroup.com/events-and-presentations . To listen by phone, call 877-870-4263 in the U.S. or 412-317-0790 outside the U.S. and ask for the PRA Group conference call. To listen to a replay of the call until March 07, 2019, call 877-344-7529 in the U.S. or 412-317-0088 outside the U.S. and use access code 10125880.
About PRA Group, Inc.
As a global leader in acquiring and collecting nonperforming loans, PRA Group, Inc. returns capital to banks and other creditors to help expand financial services for consumers in the Americas and Europe. With almost 5,400 employees worldwide, PRA Group, Inc. 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, Inc.'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, Inc.'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, Inc. 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, Inc.'s filings with the Securities and Exchange Commission including but not limited to PRA Group, Inc.'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, Inc.'s website and contain a detailed discussion of PRA Group, Inc.'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, Inc. assumes no obligation to publicly update or revise its forward-looking statements contained herein to reflect any change in PRA Group, Inc.'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.
Darby Schoenfeld, CPA
Vice President, Investor Relations
News Media Contact:
Vice President, Communications and Public Policy
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SOURCE PRA Group