PRA Group Reports Third Quarter 2024 Results
Transformation in U.S. Business Clearly Visible
Company On Track to Achieve Financial and Operational Targets for 2024; Announces Targets for 2025
NORFOLK, Va., Nov. 4, 2024 /PRNewswire/ -- PRA Group, Inc. (NASDAQ:PRAA) (the "Company"), a global leader in acquiring and collecting nonperforming loans, today reported its financial results for the third quarter of 2024 ("Q3 2024").
Q3 2024 Highlights
Net income attributable to PRA Group, Inc. of $27.2 million, or diluted earnings per share of $0.69, including a tax benefit item of $7.7 million, or $0.20 per share.
Total portfolio purchases of $350.0 million.
Total cash collections of $477.1 million.
Record estimated remaining collections (ERC)1 of $7.3 billion.
Cash efficiency ratio2 of 60.1%.
Adjusted EBITDA3 for the 12 months ended September 30, 2024 of $1.1 billion.
1.
Refers to the sum of all future projected cash collections on the Company's nonperforming loan portfolios.
2.
Calculated by dividing cash receipts less operating expenses by cash receipts. Cash receipts refers to cash collections on the Company's nonperforming loan portfolios, fees and revenue recognized from the Company's class action claims recovery services.
3.
A reconciliation of net income, the most directly comparable financial measure calculated and reported in accordance with GAAP, to Adjusted EBITDA can be found at the end of this press release.
Three Months Ended Sept 30,
Nine Months Ended Sept 30,
($ in thousands, except per share amounts)
2024
2023
2024
2023
Net income/(loss) attributable to PRA Group, Inc.
$ 27,154
$ (12,262)
$ 52,145
$ (74,695)
Diluted earnings per share
$ 0.69
$ (0.31)
$ 1.32
$ (1.91)
"Our third quarter financial results reflected strong cash collections, robust portfolio buying, significant revenue increases and solid net income. Over the past 18 months, we have built out a highly experienced senior leadership team, capitalized on the rebound in U.S. portfolio supply, executed on our cash-generating and operational initiatives with intense focus, speed and discipline, and driven the financial and operational turnaround in our U.S. business, while continuing to differentiate ourselves in Europe at a time when certain of our competitors in that region have been under pressure," said Vikram Atal, president and chief executive officer.
"We invested $350 million during the quarter, which helped us achieve record ERC of $7.3 billion. Cash collections grew 14% year-over-year, reflecting both higher portfolio purchases and the positive impact of our operational initiatives. As we enter the fourth quarter, we are on track to exceed our 2024 targets. We are also announcing 2025 targets as we continue to gain momentum in our business and focus on driving growth, profitability, and shareholder value."
Cash Collections and Revenues
The following table presents cash collections by quarter and by source on an as reported and constant currency-adjusted basis:
Cash Collection Source
2024
2023
($ in thousands)
Q3
Q2
Q1
Q4
Q3
Americas and Australia Core
$ 266,977
$ 263,828
$ 256,861
$ 220,127
$ 223,714
Americas Insolvency
26,065
26,971
25,209
24,293
27,809
Europe Core
158,242
156,739
145,933
144,361
144,402
Europe Insolvency
25,826
26,344
21,515
21,502
23,639
Total cash collections
$ 477,110
$ 473,882
$ 449,518
$ 410,283
$ 419,564
Cash Collection Source -
Constant Currency-Adjusted
2024
2023
($ in thousands)
Q3
Q3
Americas and Australia Core
$ 266,977
$ 218,303
Americas Insolvency
26,065
27,785
Europe Core
158,242
147,597
Europe Insolvency
25,826
24,255
Total cash collections
$ 477,110
$ 417,940
Total cash collections in Q3 2024 increased 13.7% to $477.1 million compared to $419.6 million in the third quarter of 2023 ("Q3 2023"). The increase was driven by higher cash collections in both the U.S. and Europe. For the nine months ended September 30, 2024, cash collections increased $150.3 million, or 12.0%, compared to the same period last year.
Total portfolio revenue in Q3 2024 increased 30.5% to $276.7 million compared to $212.1 million in Q3 2023. For the nine months ended September 30, 2024, total portfolio revenue increased 42.9% to $813.1 million compared to $568.9 million in the same period last year.
Three Months Ended Sept 30,
Nine Months Ended Sept 30,
($ in thousands)
2024
2023
2024
2023
Portfolio income
$ 216,122
$ 189,960
$ 627,468
$ 562,492
Recoveries received in excess of forecast
$ 34,158
$ 18,090
$ 124,256
$ 47,276
Changes in expected future recoveries
26,456
4,066
61,352
(40,896)
Changes in expected recoveries
$ 60,614
$ 22,156
$ 185,608
$ 6,380
Total portfolio revenue
$ 276,736
$ 212,116
$ 813,076
$ 568,872
Expenses
Operating expenses in Q3 2024 increased $18.1 million, or 10.4%, to $191.5 million compared to $173.4 million in Q3 2023.
Legal collection costs increased $8.0 million, primarily due to increased investments in our U.S. legal collections channel, which are expected to drive future cash collections growth.
Compensation and employee services expenses increased $6.6 million, primarily due to lower compensation accruals and benefits related expenses in Q3 2023 and higher wage costs in the current year period.
Legal collection fees increased $4.6 million, primarily due to higher external legal collections in our U.S. Core portfolio.
For the nine months ended September 30, 2024, operating expenses increased by $49.5 million, or 9.4%, compared to the same period last year, which included higher legal collection costs of $24.5 million related to increased investments in our U.S. legal collections channel.
Interest expense, net in Q3 2024 was $61.1 million, an increase of $11.6 million, or 23.4%, compared to $49.5 million in Q3 2023, primarily reflecting higher debt balances to support portfolio investments.
The effective tax rate for the nine months ended September 30, 2024 was 13.7%.
Portfolio Acquisitions
The Company purchased $350.0 million in portfolios of nonperforming loans in Q3 2024.
At the end of Q3 2024, the Company had in place estimated forward flow commitments1 of $491.1 million over the next 12 months, comprised of $406.3 million in the Americas and Australia and $84.8 million in Europe.
Portfolio Purchase Source
2024
2023
($ in thousands)
Q3
Q2
Q1
Q4
Q3
Americas & Australia Core
$ 263,613
$ 198,761
$ 174,660
$ 143,052
$ 187,554
Americas Insolvency
10,162
26,627
22,156
18,608
44,279
Europe Core
71,507
127,991
43,997
110,780
60,628
Europe Insolvency
4,696
25,990
5,004
12,476
18,722
Total portfolio acquisitions
$ 349,978
$ 379,369
$ 245,817
$ 284,916
$ 311,183
Credit Availability
Total availability under the Company's credit facilities as of September 30, 2024 was $1.0 billion, comprised of $412.7 million based on current ERC and subject to debt covenants, and $585.9 million of additional availability subject to borrowing base and debt covenants, including advance rates.
Financial and Operational Targets for 2024 and 2025
The Company is on track to achieve the following financial and operational targets for full year 2024:
Strong portfolio investment levels
Double-digit cash collections growth
~60% cash efficiency ratio
8%+ return on average tangible equity2 (up from 6% - 8% previously)
In addition, the Company announces the following financial and operational targets for full year 2025:
Portfolio investment levels to exceed $1.0 billion
Cash collections growth of 8% - 10%
60%+ cash efficiency ratio
Double-digit return on average tangible equity2
1.
Contractual agreements with sellers of nonperforming loans that allow for the purchase of nonperforming portfolios at pre-established prices. These amounts represent our estimated forward flow purchases over the next 12 months under the agreements in place, based on projections and other factors, including sellers' estimates of future flow sales, and are dependent on actual delivery by the sellers. Accordingly, amounts purchased under these agreements may vary significantly.
2.
A reconciliation of total stockholders' equity, PRA Group, Inc., the most directly comparable financial measure calculated and reported in accordance with GAAP, to average tangible equity can be found at the end of this press release.
Conference Call Information PRA Group, Inc. will hold a conference call today at 5:00 p.m. ET to discuss its financial and operational results. 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 646-357-8785 in the U.S. or 1-800-836-8184 outside the U.S. and ask for the PRA Group conference call. To listen to a replay of the call, either visit the same website until November 4, 2025, or call 646-517-4150 in the U.S. or 1-888-660-6345 outside the U.S. and use access code 29879# until November 11, 2024.
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, Europe, and Australia. With thousands of 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 StatementsStatements made herein that 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 the Company's 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 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 more 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.
PRA Group, Inc.
Unaudited Consolidated Income Statements
(Amounts in thousands, except per share amounts)
Three Months Ended September 30,
Nine Months Ended September 30,
2024
2023
2024
2023
Revenues:
Portfolio income
$ 216,122
$ 189,960
$ 627,468
$ 562,492
Changes in expected recoveries
60,614
22,156
185,608
6,380
Total portfolio revenue
276,736
212,116
813,076
568,872
Other revenue
4,741
4,314
8,216
12,264
Total revenues
281,477
216,430
821,292
581,136
Operating expenses:
Compensation and employee services
76,106
69,517
223,944
217,708
Legal collection fees
14,479
9,839
40,353
28,228
Legal collection costs
28,781
20,761
90,746
66,228
Agency fees
21,020
19,436
61,751
54,491
Outside fees and services
20,452
18,858
63,626
62,064
Communication
10,048
9,881
34,203
30,525
Rent and occupancy
4,175
4,426
12,455
13,193
Depreciation and amortization
2,469
3,273
7,826
10,344
Impairment of real estate
—
5,037
—
5,037
Other operating expenses
13,969
12,356
40,792
38,355
Total operating expenses
191,499
173,384
575,696
526,173
Income from operations
89,978
43,046
245,596
54,963
Other income and (expense):
Interest expense, net
(61,062)
(49,473)
(168,693)
(130,778)
Foreign exchange gain, net
10
564
138
984
Other
(676)
(500)
(836)
(1,380)
Income/(loss) before income taxes
28,250
(6,363)
76,205
(76,211)
Income tax expense/(benefit)
(672)
1,788
10,416
(15,317)
Net income/(loss)
28,922
(8,151)
65,789
(60,894)
Adjustment for net income attributable to noncontrolling interests
1,768
4,111
13,644
13,801
Net income/(loss) attributable to PRA Group, Inc.
$ 27,154
$ (12,262)
$ 52,145
$ (74,695)
Net income/(loss) per common share attributable to PRA Group, Inc.:
Basic
$ 0.69
$ (0.31)
$ 1.33
$ (1.91)
Diluted
$ 0.69
$ (0.31)
$ 1.32
$ (1.91)
Weighted average number of shares outstanding:
Basic
39,421
39,242
39,353
39,155
Diluted
39,492
39,242
39,495
39,155
PRA Group, Inc.
Consolidated Balance Sheets
(Amounts in thousands)
(unaudited)
September 30,2024
December 31,2023
Assets
Cash and cash equivalents
$ 141,135
$ 112,528
Investments
61,322
72,404
Finance receivables, net
