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 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.

EXPENSES

-- 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.

PORTFOLIO ACQUISITIONS

-- 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 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            Six Months Ended
                                                                                                      June 30,                      June 30,
                                                                                                         2017           2016           2017           2016
Revenues:
         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
Operating expenses:
         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
(in thousands)
                                                                                            (unaudited)
                                                                                            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
Liabilities:
     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
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, 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
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

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