PRA Group Reports Big Q3 with Aktiv Kapital Integration

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PRA Group (Nasdaq:PRAA), a world leader in acquiring non-performing consumer debt, today reported its financial results for the third quarter 2014. These results include the effect of the company’s Aktiv Kapital acquisition since the transaction closed on July 16, 2014.

Third Quarter Highlights

  • Cash collections of $372.7 million, up 28% from the third quarter of 2013.
  • Revenues of $239.0 million, up 21%.
  • Net income of $51.2 million, up 8%.
  • $1.01 diluted earnings per share, compared with $0.93 in the year-ago quarter, up 9%. The company incurred non-recurring expenses of $0.08 per diluted share in connection with its Aktiv Kapital acquisition and $0.03 per diluted share in foreign exchange currency losses specifically related to foreign currency forward contracts associated with the acquisition. Excluding these expenses, earnings per diluted share would have been $1.12, up 20%. A reconciliation of this non-GAAP financial measure to GAAP is included at the end of this press release.
  • 21.1% return on average equity, annualized. Excluding the non-recurring expenses related to the Aktiv Kapital acquisition and the foreign exchange currency loss, annualized return on average equity would have been 23.2%.
  • $891.4 million in portfolio acquisitions.

“PRA Group now offers global clients a compliant partner focused on a positive customer experience with the financial capacity to offer maximum value, purchasing consistency and post-sale support,” said Steve Fredrickson, chairman, president and chief executive officer, PRA Group. ”As I continue to meet with employees, clients, and service providers across Europe, I have found that the acquisition of Aktiv Kapital and integration are being met positively by all. The magnitude of our opportunity in Europe continues to impress me and by acquiring a pan-European leader, we are well positioned to capitalize on it.”

REVENUES

  • Revenues of $239.0 million in the third quarter, largely driven by cash collections, included finance receivables income net of principal amortization and net allowance reversals. Net finance receivables income was $224.3 million, up 31% from $171.5 million in the year-ago quarter.
  • Cash collections increased 28% in the third quarter from the year-ago quarter to $372.7 million, and included collections from these finance receivables sources:
Cash Collection Source ($ in thousands) Q32014 Q22014 Q12014 Q42013 Q32013
Call Center and Other Collections  $ 97,301  $ 95,072  $ 97,736  $ 84,375  $ 89,512
External Legal Collections  49,930  55,011  50,990  46,066  48,274
Internal Legal Collections  41,400  45,090  43,939  34,101  33,288
Insolvency Collections  110,544  124,101  120,702  114,384  120,577
Legacy Aktiv Kapital  73,568  –  –  –  –
Total Cash Collections  $ 372,743  $ 319,274  $ 313,367  $ 278,926  $ 291,651
  • Principal amortization of finance receivables in the third quarter was $148.4 million or 39.8% of cash collections, compared with 41.2% in the year-ago quarter. Principal amortization included a net allowance reversal of $1.7 million recorded against certain pools of finance receivables in the quarter, compared with a net allowance reversal of $2.6 million recorded in the year-ago quarter.
  • Revenues in the third quarter also included income from PRA Group’s fee-based businesses of $12.9 million, compared with $26.3 million in the year-ago quarter. The decline was primarily due to sizeable fee income from the Claims Compensation Bureau business during the third quarter of 2013.

EXPENSES AND OPERATING INCOME

  • Operating expenses were $150.8 million in the third quarter of 2014, compared with $118.3 million a year ago, an increase of 27%.  PRA Group incurred approximately $5.9 million of non-recurring expenses during the quarter related to its acquisition of Aktiv Kapital.
  • The Company also incurred $2.0 million in foreign exchange currency losses related to the acquisition of Aktiv Kapital that are included on the income statement below the operating expense line.
  • Operating income was $88.2 million, compared with $79.5 million in the year-ago quarter.  The operating margin was 36.9% in the third quarter of 2014.
  • The provision for income taxes was $28.5 million in the third quarter, up 8% from the year-ago quarter. PRA Group’s provision for income taxes was 35.8% of income before taxes in the third quarter, compared with 34.8% in the year-ago quarter.

PORTFOLIO ACQUISITIONS

  • PRA Group invested $891.4 million in new finance receivables from North American and European creditors in the third quarter of 2014, including $728 million in finance receivables from the acquisition of Aktiv Kapital, compared with $141.9 million in the year-ago quarter.
Portfolio Purchase Source ($ in thousands) Q32014 Q22014 Q12014 Q42013 Q32013
Core Customer Debt  $ 852,821  $ 93,025  $ 80,711  $ 67,522  $ 100,081
Insolvency Claims  38,535  16,187  72,003  31,987  41,794
Total Portfolio Purchases  $ 891,356  $ 109,212  $ 152,714  $ 99,509  $ 141,875

About PRA Group

PRA Group (Nasdaq:PRAA), a world leader in acquiring non-performing consumer debt, returns capital to global banks and other creditors to help expand financial services for consumers in North America and Europe. PRA Group companies collaborate with customers to help them resolve their debt and also provide a broad range of revenue and recovery services to business and government clients.

PRA has been recognized as one of Fortune’s 100 Fastest-Growing Companies for the past three years and one of Forbes’ Best Small Companies in America every year since 2007. For more information, please visit www.PRAgroup.com.

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