PRA Group Reports Second Quarter 2017 Results
Tuesday, August 08, 2017 4:06:13 PM ET
PRA Group (PRAA ), a global leader in acquiring and collecting nonperforming loans, today reported its financial results for the second quarter of 2017. The company reported net income of $11.7 million in the second quarter, compared with $36.5 million in the prior year period. Diluted earnings per share were $0.25 versus $0.79 in the second quarter of 2016.
Second Quarter Business Highlights
-- Delivered record quarterly investment in purchased portfolios in Americas Core and Americas Insolvency, outside of a business acquisition.
-- Hired almost 900 net new U.S. collectors since June of 2016, including nearly 250 in the second quarter of 2017 alone.
-- Plan to open new domestic call centers in order to provide continued, expanded service to customers and sellers.
-- Grew cash collections in all segments on a currency adjusted basis compared with second quarter of 2016 except Americas Insolvency, where cash collections grew sequentially for the first time since the second quarter of 2014.
-- Expanded North American credit facility to $1.2 billion and issued $345 million in convertible senior notes. Capital available for portfolio purchases of $1.1 billion globally.
Second Quarter Financial Highlights
-- Estimated remaining collections of $5.3 billion consistent with the prior year quarter and an increase of $181 million since the first quarter of 2017.
-- Cash collections of $374.7 million versus $387.2 million in the prior year quarter.
-- Total revenues of $200.3 million versus $228.5 million in the prior year quarter.
-- Income from operations of $48.3 million versus $72.8 million in the prior year quarter.
-- Net income of $11.7 million versus $36.5 million in the prior year quarter.
-- Portfolio acquisitions of $295.6 million versus $249.5 million in the prior year quarter.
"We continue to be excited about volumes and the significant level of investment in both Core and Insolvency in the United States. We are committed to working with customers to resolve their debt and helping sellers optimize the value of their charged-off inventories. To accommodate larger purchasing volumes, we are preparing to open new call centers in the U.S.," said Kevin Stevenson, president and chief executive officer. "During the quarter, we saw growth in currency adjusted cash collection in all segments except for Americas Insolvency, which grew sequentially for the first time in three years. We are very encouraged by both the industry and internal trends."
CASH COLLECTIONS AND REVENUES
-- The following table presents cash collections by quarter and by source on an as reported and currency adjusted basis:
Cash Collection Source 2017 2016
($ in thousands) Q2 Q1 Q4 Q3 Q2
Americas-Core $ 217,020 $ 226,906 $ 193,360 $ 210,524 $ 213,741
Americas-Insolvency 53,163 49,813 52,988 60,429 67,745
Europe-Core 99,121 98,081 97,429 96,028 102,972
Europe-Insolvency 5,371 5,030 4,974 4,719 2,744
Total Cash Collections $ 374,675 $ 379,830 $ 348,751 $ 371,700 $ 387,202
Cash Collection Source -
Constant Currency Adjusted 2017 2016
($ in thousands) Q2 Q2
Americas-Core $ 217,020 $ 214,982
Americas-Insolvency 53,163 67,697
Europe-Core 99,121 96,886
Europe-Insolvency 5,371 2,571
Total Cash Collections $ 374,675 $ 382,136
-- Currency adjusted cash collections in the quarter increased in all categories except for Americas Insolvency; however, cash collections in Americas Insolvency increased sequentially for the first time since the second quarter of 2014.
-- Net finance receivable revenue was lower than the prior year quarter due in large part to the reduction in finance receivable balances from the elevated allowance charges recorded in 2016 and normal attrition. This was partially offset by significant portfolio purchases in the first half of 2017.
-- The change in the fee income is primarily the result of the sale of Government Services in the first quarter of 2017 and a decrease in fee income generated by the Claims Compensation Bureau business which experienced an outsized second quarter in 2016.
-- The Company recorded a gain of $1.3 million from the sale of PRA Location Services during the quarter.
-- Operating expenses decreased from the previous year largely due to decreased legal collection expenses and agency fees. The decline in legal collection expense resulted primarily from an increased number of lower balance accounts which are less likely to be pursued legally and improvements to the legal selection methodology in the U.S. The decline in agency fees is primarily the result of the Company establishing a legal collection process in Italy and shifting accounts from regular collections into legal collections.
-- The Company incurred nonrecurring pre-tax charges of $2.3 million in legal fees not associated with normal operations, $1.0 million in expenses related to PRA Location Services and $0.7 million related to the amended and restated North American credit facility and the convertible senior notes issuance.
-- The Company also recorded $1.8 million in pre-tax, noncash interest expense related to its convertible notes whose effective interest rates are 4.92% and 6.20%.
-- Year-to-date tax expense was 39.9% of income before income taxes compared with 32.2% for full-year 2016, due primarily to changes in the mix of earnings and state tax rates.
-- PRA Group invested $295.6 million in new finance receivables in the second quarter.
Portfolio Purchase Source 2017 2016
($ in thousands) Q2 Q1 Q4 Q3 Q2
Americas-Core $ 144,871 $ 115,166 $ 91,800 $ 95,452 $ 130,529
Americas-Insolvency 100,040 67,123 20,929 16,760 33,723
Europe-Core 42,876 39,505 80,129 34,240 68,835
Europe-Insolvency 7,860 6,020 6,943 14,803 16,410
Total Portfolio Purchasing $ 295,647 $ 227,814 $ 199,801 $ 161,255 $ 249,497
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 63045731. To listen to a replay of the call until August 15, 2017, call 855-859-2056 in the U.S. or 404-537-3406 outside the U.S. and use conference ID 63045731.
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 Groups or its managements 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 managements current beliefs, estimates, assumptions and expectations of PRA Groups 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 Groups filings with the Securities and Exchange Commission including but not limited to PRA Groups 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 Groups website and contain a detailed discussion of PRA Groups 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 Groups 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 Six Months Ended
June 30, June 30,
2017 2016 2017 2016
Income recognized on finance receivables, net $ 190,843 $ 204,008 $ 385,378 $ 410,515
Fee income 6,344 22,347 16,202 38,613
Other revenue 3,145 2,101 5,310 4,210
Total revenues 200,332 228,456 406,890 453,338
Compensation and employee services 66,771 64,793 135,239 131,558
Legal collection expenses 31,202 33,897 62,930 64,029
Agency fees 9,254 11,309 20,054 22,193
Outside fees and services 18,061 15,876 31,346 31,684
Communication 7,254 8,423 16,391 18,305
Rent and occupancy 3,387 4,038 7,170 7,834
Depreciation and amortization 5,041 6,085 10,256 12,155
Other operating expenses 11,046 11,279 21,931 21,930
Total operating expenses 152,016 155,700 305,317 309,688
Income from operations 48,316 72,756 101,573 143,650
Other income and (expense):
Gain on sale of subsidiaries 1,322 - 48,167 -
Interest expense (22,506 ) (20,569 ) (43,763 ) (40,528 )
Foreign exchange (loss)/gain (2,516 ) 2,029 (337 ) 179
Income before income taxes 24,616 54,216 105,640 103,301
Provision for income taxes 10,766 17,348 42,175 33,580
Net income $ 13,850 $ 36,868 $ 63,465 $ 69,721
Adjustment for net income attributable to noncontrolling interests 2,177 412 3,625 1,282
Net income attributable to PRA Group, Inc. $ 11,673 $ 36,456 $ 59,840 $ 68,439
Net income per common share attributable to PRA Group, Inc.:
Basic $ 0.25 $ 0.79 $ 1.30 $ 1.48
Diluted $ 0.25 $ 0.79 $ 1.29 $ 1.48
Weighted average number of shares outstanding:
Basic 45,941 46,333 46,173 46,288
Diluted 46,060 46,402 46,344 46,387
PRA Group, Inc.
Consolidated Balance Sheets
June 30, December 31,
ASSETS 2017 2016
Cash and cash equivalents $ 92,756 $ 94,287
Investments 76,438 68,543
Finance receivables, net 2,520,883 2,307,969
Other receivables, net 11,306 11,650
Income taxes receivable 2,865 9,427
Net deferred tax asset 37,299 28,482
Property and equipment, net 36,532 38,744
Goodwill 516,165 499,911
Intangible assets, net 25,878 27,935
Other assets 40,489 33,808
Assets held for sale - 43,243
Total assets $ 3,360,611 $ 3,163,999
LIABILITIES AND EQUITY
Accounts payable $ 3,694 $ 2,459
Accrued expenses 77,869 82,699
Income taxes payable 19,793 19,631
Net deferred tax liability 250,821 258,344
Interest-bearing deposits 92,479 76,113
Borrowings 1,899,148 1,784,101
Other liabilities 3,094 10,821
Liabilities held for sale - 4,220
Total liabilities 2,346,898 2,238,388
Redeemable noncontrolling interest 8,860 8,448
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, 45,166 at June 30, 2017; 100,000 authorized
shares, 46,356 issued and outstanding shares at December 31, 2016 452 464
Additional paid-in capital 49,928 66,414
Retained earnings 1,109,207 1,049,367
Accumulated other comprehensive loss (204,213 ) (251,944 )
Total stockholders equity - PRA Group, Inc. 955,374 864,301
Noncontrolling interest 49,479 52,862
Total equity 1,004,853 917,163
Total liabilities and equity $ 3,360,611 $ 3,163,999
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