PRA Group Reports Third Quarter 2016 Results

NORFOLK, Va., Nov. 07, 2016 (GLOBE NEWSWIRE) -- PRA Group, Inc. (Nasdaq:PRAA), a global leader in acquiring and collecting nonperforming loans, today reported its financial results for the third quarter of 2016.  The company reported diluted earnings per share of $0.74 versus $0.36 in the third quarter of 2015 and non-GAAP diluted earnings per share of $0.68 for the third quarter of 2016 compared to $0.85 for the year-ago quarter. Non-GAAP financial results are presented in constant currency with the third quarter of 2015 and exclude items unrelated to normal operations.  A reconciliation of all non-GAAP financial measures to the most directly comparable GAAP financial measure can be found at the end of this press release. 

Third Quarter Highlights
  • Estimated remaining collections of $5.25 billion. 
  • Cash collections of $371.7 million, currency adjusted cash collections of $377.0 million. 
  • Total revenues of $222.0 million, currency adjusted revenues of $224.2 million. 
  • Income from operations of $67.5 million, non-GAAP income from operations of $69.8 million.
  • Net income of $34.3 million, non-GAAP net income of $31.7 million. 
  • Return on average equity, annualized, of 15.1%, non-GAAP return on average equity, annualized, of 14.0%. 
  • $161.3 million in investments.

"We continue to evolve the Company in a number of areas including normalizing operations in the U.S. legal collection channel despite increased documentation requirements.  Italy is progressing well.  We have significantly strengthened the leadership team there and we are beginning to see positive signs of return on our investment in the legal collection channel.  Although we still have work to do, we are pleased with the progress the team has been able to achieve in 2016," said Steve Fredrickson, chairman and chief executive officer, PRA Group.  "From an investment perspective, we also continue to deploy capital at good returns, especially in the US and Brazil, and maintain strong relationships with global sellers of nonperforming loans, providing them with a compliant and responsible global partner." 

REVENUES AND CASH COLLECTIONS

  • Total revenues of $222.0 million in the third quarter included finance receivables income net of principal amortization and net allowance charges versus $229.4 million in the prior year period.  For the nine months ended September 30, 2016, total revenues were $675.3 million versus $711.8 million in the prior year period. 
  • Cash collections in the third quarter were $371.7 million versus $380.8 million in the prior year period.  Cash collections for the first nine months of 2016 were $1,143.2 million versus $1,170.1 million in the prior year period.  Both GAAP and currency adjusted cash collections are reported below and were comprised of collections from these finance receivables sources: 
               
Cash Collection Source   2016       2015  
($ in thousands) Q3 Q2 Q1   Q4 Q3
Americas-Core $   210,524   $   213,741   $   219,571     $   195,834   $   210,725  
Americas-Insolvency     60,429       67,745       68,646         73,843       81,865  
Europe-Core     96,028       102,972       94,091         97,149       85,635  
Europe-Insolvency     4,719       2,744       2,025         2,545       2,528  
Total Cash Collections $   371,700   $   387,202   $   384,333     $   369,371   $   380,753  
             
Cash Collection Source -              
Constant Currency Adjusted   2016             2015  
($ in thousands) Q3         Q3
Americas-Core $   208,962           $   210,725  
Americas-Insolvency     60,445               81,865  
Europe-Core     102,470               85,635  
Europe-Insolvency     5,171               2,528  
Total Cash Collections $   377,048           $   380,753  
             
             
  • Principal amortization of finance receivables in the third quarter was $169.1 million or 45.5% of cash collections, compared with $172.6 million or 45.3% in the prior year period.   Principal amortization included a net allowance charge of $13.1 million recorded against certain pools of finance receivables in the quarter, compared with a net allowance charge of $11.3 million recorded in the prior year period.  Principal amortization of finance receivables for the first nine months of 2016 was $530.1 million or 46.4% of cash collections, including a net allowance charge of $36.0 million compared with $513.5 million or 43.9%, including a net allowance charge of $17.9 million in the prior year period.
  • Revenues for the third quarter were negatively impacted by two portfolios in Italy being on non-accrual which applied all cash collections of $6.1 million to principal amortization during this seasonally weak period. 
  • Revenues in the third quarter also included income from PRA Group's fee-based businesses of $17.6 million, compared with $17.8 million in the prior year period, and other income of $1.7 million compared with $3.4 million in the prior year period.  For the first nine months of 2016, fee income was $56.2 million compared with $44.7 million in the prior year period and other income was $6.0 million compared with $10.4 million in the prior year period.

EXPENSES AND OPERATING INCOME
  • Operating expenses were $154.5 million in the third quarter, compared with $175.3 million in the prior year period.  Non-GAAP operating expenses were $154.4 million, compared with $144.4 million in the prior year period.  For the first nine months of 2016, operating expenses were $464.2 million, compared with $472.7 million in the prior year period and non-GAAP operating expenses were $463.5 million, compared with $438.2 million in the prior year period. 
  • Operating income in the third quarter was $67.5 million, compared with $54.1 million in the prior year period.  Non-GAAP operating income was $69.8 million, compared with $85.0 million in the prior year period.  For the first nine months of 2016, operating income was $211.1 million versus $239.2 million in the prior year period and non-GAAP operating income was $219.3 million, compared with $273.6 million in the prior year period.  The operating margin was 30.4% in the third quarter and 31.3% for the first nine months of 2016.     
  • The provision for income taxes was $16.7 million in the third quarter compared to $16.6 million in the prior year period.  For the first nine months of 2016, the provision for income taxes was $50.2 million, or 32.1% of income before taxes, compared to $74.2 million, or 36.9% of income before taxes, in the prior year period. 

NET INCOME AND EPS
  • Net income was $34.3 million in the third quarter, compared with $17.4 million in the prior year period.  The net income margin in the third quarter of 2016 was 16.5%. Non-GAAP net income was $31.7 million, compared with $41.4 million in the prior year period.  For the first nine months of 2016, net income was $102.7 million, compared with $127.0 million in the prior year period and non-GAAP net income was $109.5 million, compared with $153.6 million in the prior year period.  The net income margin for the first nine months of 2016 was 15.7%. 
  • Earnings per diluted share in the third quarter were $0.74, compared with $0.36 in the prior year period.  Non-GAAP earnings per diluted share were $0.68, compared with $0.85 in the prior year period.  For the first nine months of 2016, earnings per diluted share were $2.21 versus $2.61 in the prior year period and non-GAAP earnings per diluted share were $2.36, compared with $3.15 in the prior year period.        

PORTFOLIO ACQUISITIONS
  • PRA Group invested $161.3 million in new finance receivables in the third quarter of 2016.     
               
Portfolio Purchase Source   2016       2015  
($ in thousands) Q3 Q2 Q1   Q4 Q3
Americas-Core $   95,452   $   130,529   $   136,057     $   120,554   $   90,912  
Americas-Insolvency     16,760       33,723       22,952         20,589       9,300  
Europe-Core     34,240       68,835       171,038         79,735       240,385  
Europe-Insolvency     14,803       16,410       6,731         4,976       3,959  
Total Portfolio Purchasing $   161,255   $   249,497   $   336,778     $   225,854   $   344,556  
             
       

BALANCE SHEET
  • Cash and cash equivalents were $91.8 million as of September 30, 2016, compared with $69.1 million as of September 30, 2015. 
  • Net deferred tax liabilities were $271.2 million as of September 30, 2016, compared with $267.6 million as of September 30, 2015. 
  • Borrowings totaled $1.82 billion as of September 30, 2016, compared with $1.65 billion as of September 30, 2015.
  • Equity attributable to PRA Group, Inc. was $937.7 million as of September 30, 2016, compared with $863.5 million as of September 30, 2015.   

Conference Call Information PRA Group will hold a conference call today at 5:00 p.m. ET to discuss the company's third quarter results.  To listen to a webcast of the call, 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 7245944.  To listen to a replay of the call until November 14, 2016, call 855-859-2056 in the U.S. or 404-537-3406 outside the U.S. and use conference ID 7245944.        

About PRA GroupAs a global leader in acquiring and collecting nonperforming loans, PRA Group (Nasdaq:PRAA) returns capital to banks and other creditors to help expand financial services for consumers in the Americas and Europe. With almost 4,000 employees worldwide, PRA Group companies collaborate with customers to help them resolve their debt and provide a broad range of additional revenue and recovery services to business and government clients. For more information, please visit www.pragroup.com.

About Forward Looking StatementsStatements made herein which are not historical in nature, including PRA Group's or its management's intentions, beliefs, expectations, 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 Group 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   Nine Months Ended
              September 30,   September 30,
                2016       2015       2016       2015  
                           
Revenues:              
  Income recognized on finance receivables, net $ 202,639       208,184     $ 613,154     $ 656,651  
  Fee income   17,597       17,803       56,210       44,734  
  Other revenue   1,748       3,443       5,958       10,448  
        Total revenues   221,984       229,430       675,322       711,833  
                                           
Operating expenses:                              
  Compensation and employee services   65,898       66,084       197,456       199,675  
  Legal collection fees   9,309       13,715       37,357       41,520  
  Legal collection costs   24,137       18,879       60,118       59,289  
  Agency fees   12,034       7,961       34,227       24,006  
  Outside fees and services   14,731       12,583       46,415       37,846  
  Communication   7,814       8,021       26,119       26,512  
  Rent and occupancy   3,875       3,684       11,709       10,723  
  Depreciation and amortization   6,184       5,413       18,339       14,939  
  Other operating expenses   10,514       38,963       32,444       58,151  
        Total operating expenses   154,496       175,303       464,184       472,661  
        Income from operations   67,488       54,127       211,138       239,172  
                                           
Other income and (expense):                              
  Interest expense   (19,310 )     (16,787 )     (59,838 )     (45,015 )
  Foreign exchange gain/(loss)   5,004       (3,160 )     5,183       7,213  
        Income before income taxes   53,182       34,180       156,483       201,370  
                                           
        Provision for income taxes   16,664       16,597       50,244       74,227  
        Net income $   36,518     $ 17,583     $ 106,239     $ 127,143  
          Adjustment for net income attributable to noncontrolling interest   2,212       187       3,494       187  
        Net income attributable to PRA Group, Inc. $   34,306     $ 17,396     $ 102,745     $ 126,956  
                                           
Net income per common share attributable to PRA Group, Inc.:                              
  Basic     $   0.74     $   0.36     $   2.22     $   2.62  
  Diluted   $   0.74     $   0.36     $   2.21     $   2.61  
                                           
Weighted average number of shares outstanding:                              
  Basic       46,343       48,265       46,307       48,438  
  Diluted     46,434       48,498       46,403       48,693  
                           

PRA Group, Inc.
Unaudited Consolidated Balance Sheets
(in thousands)
                   
              September 30,   December 31,
ASSETS   2016       2015  
                   
Cash and cash equivalents $   91,791     $   71,372  
Investments   67,050       73,799  
Finance receivables, net   2,392,408       2,202,113  
Other receivables, net   24,299       30,771  
Income taxes receivable   10,673       1,717  
Net deferred tax asset   19,453       13,068  
Property and equipment, net   44,354       45,394  
Goodwill       560,505       495,156  
Intangible assets, net   31,539       23,788  
Other assets   37,275       33,389  
                           
          Total assets $   3,279,347     $   2,990,567  
                           
LIABILITIES AND EQUITY              
                           
Liabilities:                
  Accounts payable $   2,808     $   4,190  
  Accrued expenses   86,531       95,380  
  Income taxes payable   20,242       21,236  
  Net deferred tax liability   271,152       261,498  
  Interest-bearing deposits   88,719       46,991  
  Borrowings   1,816,600       1,717,129  
  Other liabilities   5,317       4,396  
                           
          Total liabilities   2,291,369       2,150,820  
                           
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, 46,344 at September 30, 2016; 100,000               
      authorized shares, 46,173 issued and outstanding shares at    463       462  
      December 31, 2015              
    Additional paid-in capital   70,112       64,622  
    Retained earnings   1,067,015       964,270  
    Accumulated other comprehensive loss   (199,888 )     (228,861 )
      Total stockholders' equity - PRA Group, Inc.   937,702       800,493  
        Noncontrolling interest   50,276       39,254  
        Total equity   987,978       839,747  
          Total liabilities and total equity $   3,279,347     $   2,990,567  
                   

PRA Group, Inc.
FINANCIAL HIGHLIGHTS
  As of and for the   As of and for the
  Three Months Ended September 30,   Nine Months Ended September 30,
    2016     2015   Change     2016     2015   Change
EARNINGS (in thousands)              
Income recognized on finance receivables, net $   202,639   $   208,184     -3 %   $   613,154   $   656,651     -7 %
Fee income     17,597       17,803     -1 %       56,210       44,734     26 %
Other revenue     1,748       3,443     -49 %       5,958       10,448     -43 %
Total revenues     221,984       229,430     -3 %       675,322       711,833     -5 %
Operating expenses     154,496       175,303     -12 %       464,184       472,661     -2 %
Income from operations     67,488       54,127     25 %       211,138       239,172     -12 %
Net interest expense     19,310       16,787     15 %       59,838       45,015     33 %
Net income     36,518       17,583     108 %       106,239       127,143     -16 %
Net income attributable to PRA Group, Inc.     34,306       17,396     97 %       102,745       126,956     -19 %
                                       
PERIOD-END BALANCES (in thousands)                                      
Cash and cash equivalents $   91,791   $   69,111     33 %   $   91,791   $   69,111     33 %
Finance receivables, net     2,392,408       2,167,178     10 %       2,392,408       2,167,178     10 %
Goodwill and intangible assets, net     592,044       526,841     12 %       592,044       526,841     12 %
Total assets     3,279,347       2,984,550     10 %       3,279,347       2,984,550     10 %
Borrowings     1,816,600       1,654,457     10 %       1,816,600       1,654,457     10 %
Total liabilities     2,291,369       2,083,131     10 %       2,291,369       2,083,131     10 %
Total equity - PRA Group, Inc.     937,702       863,517     9 %       937,702       863,517     9 %
                                       
FINANCE RECEIVABLE INCOME (dollars in thousands)                                      
Cash collections $   371,700   $   380,753     -2 %   $  1,143,235   $  1,170,124     -2 %
Cash collections on fully amortized pools     7,744       11,453     -32 %       25,144       43,620     -42 %
Principal amortization without allowance (reversals)/charges     155,915       161,234     -3 %       494,117       495,623     0 %
Allowance (reversal)/charge     13,146       11,335     16 %       35,964       17,850     101 %
Principal amortization with allowance (reversals)/charges     169,061       172,569     -2 %       530,081       513,473     3 %
Principal amortization w/ allowance charges as % of cash collections:                                      
  Including fully amortized pools   45.5 %   45.3 %   0 %     46.4 %   43.9 %   6 %
  Excluding fully amortized pools   46.5 %   46.7 %   -1 %     47.4 %   45.6 %   4 %
Allowance (reversal)/charge to period-end net finance receivables   0.5 %   0.5 %   5 %     1.5 %   0.8 %   83 %
                                       
PURCHASES OF FINANCE RECEIVABLES (dollars in thousands)                                      
Purchase price - Americas core $   95,452   $   90,912     5 %   $   362,038   $   327,727     10 %
Purchase price - Americas insolvency     16,760       9,300     80 %       73,435       44,848     64 %
Purchase price - Europe core     34,240       240,385     -86 %       274,113       350,463     -22 %
Purchase price - Europe insolvency     14,803       3,959     274 %       37,944       14,919     154 %
Purchase price - total     161,255       344,556     -53 %       747,530       737,957     1 %
Number of portfolios - total   122     128     -5 %     397     403     -1 %
ESTIMATED REMAINING COLLECTIONS (in thousands)                                      
Estimated remaining collections - Americas core $   2,672,427   $   2,421,506     10 %   $   2,672,427   $   2,421,506     10 %
Estimated remaining collections - Americas insolvency     356,363       474,097     -25 %       356,363       474,097     -25 %
Estimated remaining collections - Europe core     2,148,230       1,903,226     13 %       2,148,230       1,903,226     13 %
Estimated remaining collections - Europe insolvency     72,919       30,081     142 %       72,919       30,081     142 %
Estimated remaining collections - total     5,249,939       4,828,910     9 %       5,249,939       4,828,910     9 %
Adjusted estimated remaining collections (7)     5,345,657       4,945,609     8 %       5,345,657       4,945,609     8 %
                                       
SHARE DATA (share amounts in thousands)                                      
Net income per common share - diluted $   0.74   $   0.36     106 %   $   2.21   $   2.61     -15 %
Weighted average number of shares outstanding - diluted     46,434       48,498     -4 %       46,403       48,693     -5 %
Shares repurchased     -       133     -100 %       -       1,611     -100 %
Average price paid per share repurchased (including acquisitions costs) $   -        58.08     -100 %   $   -        53.10     -100 %
Closing market price $   34.54   $   52.92     -35 %   $   34.54   $   52.92     -35 %
                                       
RATIOS AND OTHER DATA (dollars in thousands)                                      
Return on average equity (1)   15.1 %   7.8 %   95 %     15.6 %   19.9 %   -22 %
Return on revenue (2)   16.5 %   7.7 %   115 %     15.7 %   17.9 %   -12 %
Return on average assets (3)   4.2 %   2.3 %   81 %     4.2 %   6.0 %   -31 %
Operating margin (4)   30.4 %   23.6 %   29 %     31.3 %   33.6 %   -7 %
Operating expense to cash receipts (5)   39.7 %   44.0 %   -10 %     38.7 %   38.9 %   -1 %
Debt to stockholders'equity (6)   193.7 %   191.6 %   1 %     193.7 %   191.6 %   1 %
Number of full-time equivalent collectors   2,083     2,159     -4 %     2,083     2,159     -4 %
Number of full-time equivalent employees   3,859     3,715     4 %     3,859     3,715     4 %
Cash receipts (5) $   389,297   $   398,556     -2 %   $   1,199,445   $   1,214,858     -1 %
Lines of credit - unused portion at period end     630,775       393,246     60 %       630,775       393,246     60 %
               
(1)  Calculated as annualized net income divided by average equity for the period            
(2)  Calculated as net income divided by total revenues              
(3)  Calculated as annualized net income divided by average assets for the period            
(4)  Calculated as income from operations divided by total revenues              
(5)  "Cash receipts" is defined as cash collections plus fee income              
(6)  For purposes of this ratio, "debt" equals borrowings              
(7)  Equals total estimated remaining collections on our owned finance receivable            
portfolios plus the estimated remaining collections on certain of our other investments.          
               

PRA Group, Inc.
FINANCIAL HIGHLIGHTS
  For the Quarter Ended
  September 30 June 30 March 31 December 31 September 30
    2016     2016     2016     2015     2015  
EARNINGS (in thousands)          
Income recognized on finance receivables, net $   202,639   $   204,008   $   206,507   $   208,471   $   208,184  
Fee income     17,597       22,347       16,266       19,649       17,803  
Other revenue     1,748       2,101       2,109       2,065       3,443  
Total revenues     221,984       228,456       224,882       230,185       229,430  
Operating expenses     154,496       155,700       153,988       159,013       175,303  
Income from operations     67,488       72,756       70,894       71,172       54,127  
Net interest expense     19,310       20,569       19,959       15,321       16,787  
Net income     36,518       36,868       32,853       40,988       17,583  
Net income attributable to PRA Group, Inc.     34,306       36,456       31,983       40,970       17,396  
                               
PERIOD-END BALANCES (in thousands)                              
Cash and cash equivalents $   91,791   $   117,071   $   79,442   $   71,372   $   69,111  
Finance receivables, net     2,392,408       2,399,949       2,377,077       2,202,113       2,167,178  
Goodwill and intangible assets, net     592,044       576,992       557,024       518,944       526,841  
Total assets     3,279,347       3,305,596       3,268,833       2,990,567       2,984,550  
Borrowings     1,816,600       1,912,283       1,896,424       1,717,129       1,654,457  
Total liabilities     2,291,369       2,370,415       2,360,091       2,150,820       2,083,131  
Total equity - PRA Group, Inc.     937,702       886,077       864,868       800,493       863,517  
                               
FINANCE RECEIVABLE COLLECTIONS (dollars in thousands)                              
Cash collections $   371,700   $   387,202   $   384,333   $   369,371   $   380,753  
Cash collections on fully amortized pools     7,744       8,124       9,276       8,280       11,453  
Principal amortization without allowance (reversals)/charges     155,915       170,274       167,928       149,381       161,234  
Allowance (reversal)/charge     13,146       12,920       9,898       11,519       11,335  
Principal amortization with allowance (reversals)/charges     169,061       183,194       177,826       160,900       172,569  
Principal amortization w/ allowance charges as % of cash collections:                              
  Including fully amortized pools   45.5 %   47.3 %   46.3 %   43.6 %   45.3 %
  Excluding fully amortized pools   46.5 %   48.3 %   47.4 %   44.6 %   46.7 %
Allowance (reversal)/charge to period-end net finance receivables   0.5 %   0.5 %   0.4 %   0.5 %   0.5 %
                               
PURCHASES OF FINANCE RECEIVABLES (dollars in thousands)                              
Purchase price - North America core $   95,452   $   130,529   $   136,057   $   120,554   $   90,912  
Purchase price - North America insolvency     16,760       33,723       22,952       20,589       9,300  
Purchase price - Europe core     34,240       68,835       171,038       79,735       240,385  
Purchase price - Europe insolvency     14,803       16,410       6,731       4,976       3,959  
Purchase price - total     161,255       249,497       336,778       225,854       344,556  
Number of portfolios - total   122     136     139     139     128  
                               
ESTIMATED REMAINING COLLECTIONS (in thousands)                              
Estimated remaining collections - Americas core $   2,672,427   $   2,705,781   $   2,643,410   $   2,558,529   $   2,421,506  
Estimated remaining collections - Americas insolvency     356,363       396,667       421,866       448,652       474,097  
Estimated remaining collections - Europe core     2,148,230       2,171,542       2,152,403       1,964,763       1,903,226  
Estimated remaining collections - Europe insolvency     72,919       59,107       40,938       34,878       30,081  
Estimated remaining collections - total     5,249,939       5,333,097       5,258,617       5,006,822       4,828,910  
Adjusted estimated remaining collections (7)     5,345,657       5,430,192       5,366,417       5,114,923       4,945,609  
                               
SHARE DATA (share amounts in thousands)                              
Net income per common share - diluted $   0.74   $   0.79   $   0.69   $   0.86   $   0.36  
Weighted average number of shares outstanding - diluted     46,434       46,402       46,372       47,539       48,498  
Shares repurchased     -       -       -       2,072       133  
Average price paid per share repurchased (including acquisitions costs)   $ -   $   -    $   -    $    38.60   $  58.08   
Closing market price $   34.54   $   24.14   $   29.39   $   34.69   $   52.92  
                               
RATIOS AND OTHER DATA (dollars in thousands)                              
Return on average equity (1)   15.1 %   16.4 %   15.4 %   19.8 %   7.8 %
Return on revenue (2)   16.5 %   16.1 %   14.6 %   17.8 %   7.7 %
Return on average assets (3)   4.2 %   4.4 %   4.1 %   5.5 %   2.3 %
Operating margin (4)   30.4 %   31.8 %   31.5 %   30.9 %   23.6 %
Operating expense to cash receipts (5)   39.7 %   38.0 %   38.4 %   40.9 %   44.0 %
Debt to stockholders'equity (6)   193.7 %   215.8 %   219.3 %   214.5 %   191.6 %
Number of collectors   2,083     2,023     2,103     2,173     2,159  
Number of full-time equivalent employees   3,859     3,816     3,748     3,799     3,715  
Cash receipts (5) $   389,297   $   409,549   $   400,599   $   389,020   $   398,556  
Lines of credit - unused portion at period end     630,775       430,651       435,709       446,769       393,246  
           
(1)  Calculated as annualized net income divided by average equity for the period      
(2)  Calculated as net income divided by total revenues          
(3)  Calculated as annualized net income divided by average assets for the period      
(4)  Calculated as income from operations divided by total revenues          
(5)  "Cash receipts" is defined as cash collections plus fee income          
(6)  For purposes of this ratio, "debt" equals borrowings          
(7)  Equals total estimated remaining collections on our owned finance receivable      
portfolios plus the estimated remaining collections on certain of our other investments.    
           

Use of Non-GAAP Financial MeasuresPRA Group, Inc. reports financial results in accordance with U.S. generally accepted accounting principles (GAAP).  However, the Company believes certain non-GAAP financial measures and ratios, which exclude penalty and redress associated with the Consumer Financial Protection Bureau consent order, expenses associated with acquisitions, legal costs not associated with normal operations, one-time tax items and constant currency adjustments, improve comparability between current year results and prior periods and better reflect the Company's operational performance.  In all periods presented, the Company adjusted the income tax provision by excluding the tax impact of the non-GAAP adjustments discussed above in non-GAAP financial measures. Management uses non-GAAP financial measures internally to evaluate the Company's performance and to set performance goals.  Reconciliations from non-GAAP to the most directly comparable GAAP financial measures are provided below.  These non-GAAP financial measures should be viewed in addition to, not as an alternative for reported GAAP results.

The constant currency results assume that foreign revenues and expenses are translated from foreign currencies to the U.S. Dollar at rates consistent with the prior year, and that any benefit or loss caused by foreign currency fluctuations would be consistent with the prior year.  To do this the Company translates the current year's income statements into U.S. Dollars using the prior year's average exchange rates and then replaces the foreign exchange gain or loss for the current year with the balance from the prior year.  Finally, the Company calculates the tax impact of the constant currency results to reflect the current effective tax rate of the reporting period.
 
Three Months Ended September 30, 2016
    Net Income       Average Equity       Return on Average Equity, Annualized  
  As Reported   $   34,306     $   907,797       15.1 %
  Adjustments       (2,653 )       (884 )     -1.1 %
  As Adjusted       31,653         906,913       14.0 %
           
Nine Months Ended September 30, 2016
    Net Income       Average Equity         Return on Average Equity, Annualized
  As Reported   $   102,745     $   875,585       15.6 %
  Adjustments       6,735         748       1.1 %
  As Adjusted       109,480         876,333       16.7 %
           
Three Months Ended September 30, 2015
    Net Income       Average Equity       Return on Average Equity, Annualized  
  As Reported   $   17,396     $   897,043       7.8 %
  Adjustments       24,042         8,014       10.5 %
  As Adjusted       41,438         905,057       18.3 %
           
Nine Months Ended September 30, 2015
    Net Income       Average Equity       Return on Average Equity, Annualized  
  As Reported   $   126,956     $   848,602       19.9 %
  Adjustments       26,655         2,961       4.1 %
  As Adjusted       153,611         851,563       24.1 %
           

  Three Months Ended September 30, 2016
    Total Revenues   Total Operating Expenses   Income from Operations   Provision for Income Taxes   Net Income attributable to PRA Group, Inc.   Diluted EPS
  As Reported $   221,984     $   154,496     $   67,488     $   16,664     $   34,306     $   0.74  
  Adjustments:                      
  CFPB expenses including penalty and redress     -          (20 )       20         8         12         -   
  Acquisition-related expenses     -          (216 )       216         84         132         -   
  One-time tax items     -          -          -          (1,383 )       1,383         0.03  
  Legal costs not associated with normal operations     -          (1,511 )       1,511         584         927         0.02  
  Constant currency adjustments     2,216         1,620         596         (4,597 )       (5,107 )       (0.11 )
  Subtotal of adjustments     2,216         (127 )       2,343         (5,304 )       (2,653 )       (0.06 )
  As Adjusted     224,200         154,369         69,831         11,360         31,653         0.68  
                       
  Nine Months Ended September 30, 2016
    Total Revenues   Total Operating Expenses   Income from Operations   Provision for Income Taxes   Net Income attributable to PRA Group, Inc.   Diluted EPS
  As Reported $   675,322     $   464,184     $   211,138     $   50,244     $   102,745     $   2.21  
  Adjustments:                      
  CFPB expenses including penalty and redress     -          (93 )       93         34         59         -   
  Acquisition-related expenses     -          (1,807 )       1,807         661         1,146         0.03  
  One-time tax items     -          -          -          (1,383 )       1,383         0.03  
  Legal costs not associated with normal operations     -          (3,569 )       3,569         1,305         2,264         0.05  
  Constant currency adjustments     7,487         4,749         2,738         (957 )       1,882         0.04  
  Subtotal of adjustments     7,487         (720 )       8,207         (340 )       6,734         0.15  
  As Adjusted     682,809         463,464         219,345         49,904         109,479         2.36  
                       
  Three Months Ended September 30, 2015
    Total Revenues   Total Operating Expenses   Income from Operations   Provision for Income Taxes   Net Income attributable to PRA Group, Inc.   Diluted EPS
  As Reported $   229,430     $   175,303     $   54,127     $   16,597     $   17,396     $   0.36  
  Adjustments:                      
  CFPB expenses including penalty and redress     -          (28,806 )       28,806         8,262         20,544         0.42  
  Acquisition-related expenses     -          (802 )       802         230         572         0.01  
  One-time tax items     -          -          -          (2,026 )       2,026         0.04  
  Legal costs not associated with normal operations     -          (1,262 )       1,262         362         900         0.02  
  Subtotal of adjustments     -          (30,870 )       30,870         6,828         24,042         0.49  
  As Adjusted     229,430         144,433         84,997         23,425         41,438         0.85  
 
 
  Nine Months Ended September 30, 2015
    Total Revenues   Total Operating Expenses   Income from Operations   Provision for Income Taxes   Net Income attributable to PRA Group, Inc.   Diluted EPS
  As Reported $   711,833     $   472,661     $   239,172     $   74,227     $   126,956     $   2.61  
  Adjustments:                      
  CFPB expenses including penalty and redress     -          (28,806 )       28,806         8,220         20,586         0.42  
  Acquisition-related expenses     -          (3,988 )       3,988         1,138         2,850         0.06  
  One-time tax items     -          -          -          (2,026 )       2,026         0.04  
  Legal costs not associated with normal operations     -          (1,669 )       1,669         476         1,193         0.02  
  Subtotal of adjustments     -          (34,463 )       34,463         7,808         26,655         0.54  
  As Adjusted     711,833         438,198         273,635         82,035         153,611         3.15  
 

Investor Contact:Darby SchoenfeldDirector of Investor Relations(757) 431-7913DCSchoenfeld@PRAGroup.comNews Media Contact:Nancy PorterVice President, Corporate Communications(757) 431-7950NAPorter@PRAGroup.com

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