Financial Data and Key Metrics - Total revenues for Q1 2024 were $256 million, with portfolio revenue contributing $254 million, including $202 million in portfolio income and $52 million in changes in expected recoveries [36] - Cash collections for the quarter were $450 million, up 9% YoY and 7% on a constant currency basis, driven by strong performance in the U S and Brazil [51] - ERC (Expected Recoverable Collections) at March 31 was $6 5 billion, up 15% YoY, with $1 6 billion expected to be collected in the next 12 months [62] - Net income attributable to PRA was $3 million or $0 09 in diluted earnings per share [50] Business Line Performance - Americas cash collections increased 11% YoY (10% on a constant currency basis), driven by higher collections in the U S and Brazil [51] - U S cash collections increased 9% YoY, with U S Core cash collections up 23% sequentially in Q1 2024, reflecting higher portfolio purchases and cash-generating initiatives [52] - European cash collections increased 6% YoY (3% on a constant currency basis) [52] - Portfolio income grew YoY for the third consecutive quarter, driven by higher recent purchases and improved returns, particularly in the U S [45] Market Performance - In the Americas, the company invested $197 million in Q1 2024, up 48% YoY, with $187 million deployed in the U S, up 71% YoY, reflecting the second-highest Q1 U S investment level in company history [34] - In Europe, the company invested $49 million in Q1 2024, influenced by low market volumes, but expects a significant uptick in Q2 purchases [35][44] - The U S Core Vintage pricing improved to 2 11 times at the end of Q1 2024, compared to 1 97 times for the full year 2023 [34] Strategic Direction and Industry Competition - The company's turnaround strategy is supported by three pillars: optimizing investments, driving operational execution, and managing expenses [16] - The U S market continues to see strong credit normalization, with credit card balances exceeding $1 trillion and delinquency and charge-off rates rising to 3 1% and 4 2%, respectively [17] - The company is strategically deploying capital in markets with the most attractive returns, benefiting from repriced forward flows and improved pricing [18] - In Europe, the company maintains a disciplined underwriting and purchasing approach, with a stable management team and a long track record of healthy investments [43] Management Commentary on Operating Environment and Future Outlook - Management expressed confidence in the U S market, citing strong cash initiatives and improved collections from older vintages [2][5] - The company expects continued growth in U S portfolio purchases due to increasing supply and improved pricing [29] - In Europe, the company anticipates stronger investment volumes in Q2 2024, aligning with long-term trends [30] - Management reiterated financial and operational targets for 2024, including double-digit cash collection growth, modest expense growth, and a return on average tangible equity between 6% and 8% [65] Other Important Information - The company has $3 1 billion in total committed capital under its credit facilities, with margins ranging from 235 to 380 basis points over benchmark rates [56] - Operating expenses for Q1 2024 were $189 million, including $6 million in outsized corporate legal and consulting expenses [57] - The company's leverage ratio was 2 83 times debt-to-adjusted EBITDA as of March 31, within the target range of 2 to 3 times [63] Q&A Session Summary Question: Non-controlling interest expense in Brazil - The company has a joint venture structure in Brazil, with strong performance driven by a focus on the auto market and disciplined investments [69][70] - Management is evaluating opportunities for consolidation but continues to work with partners [69] Question: Europe market activity and competition - The company expects Q2 2024 purchases in Europe to be around $100-$110 million, reflecting a tangible pickup in supply [75][76] - Competition in Europe remains aggressive, with no significant pullback from competitors despite market challenges [81] Question: Wage garnishment and regulatory risks - Wage garnishment is a standard, well-established element of the U S legal process, with no regulatory concerns [95] Question: Cash efficiency target - The company aims for a 60% cash efficiency target for 2024, with potential improvements beyond that in 2025 [92][96] Question: Legal expenses in Europe - Higher legal expenses in Q1 2024 were due to a catch-up in court activity, and the company does not expect this level to be the new baseline [117]

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. • Total portfolio purchases of $245.8 million. • Total cash collections of $449.5 million. • Estimated remaining collections (ERC) of $6.5 billion. 1 • Cash efficiency ratio of 58.0%. 2 • Diluted earnings per share of $0.09. • Debt to Adjusted EBITDA for the 12 months ended March 31, 2024 was 2.83x. 3 • Total avai ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 2023 ☐ Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ________ to ________ Commission File Number: 000-50058 PRA Group, Inc. (Exact name of registrant as specified in its charter) Delaware 75-3078675 (I.R.S. Employer Identification ...

Financial Data and Key Metrics Changes - Total revenues for Q4 2023 were $221 million, with full-year revenues at $803 million, reflecting a year-over-year increase in portfolio income [18][25] - Net loss attributable to PRA was $9 million for Q4 2023, translating to a diluted loss per share of $0.22, while the full-year net loss was $83 million, or $2.13 per share [25] - Cash efficiency for Q4 2023 was reported at 57.3%, with operating expenses increasing by 8% year-over-year to $176 million [21][22] Business Line Data and Key Metrics Changes - Portfolio purchases in Q4 2023 totaled $285 million, consistent with the prior year, while full-year purchases reached $1.2 billion, up 36% year-over-year [15] - In the Americas, portfolio investments for Q4 were $162 million, a 27% increase year-over-year, with U.S. investments at $141 million, up 61% [16] - European investments were $123 million for Q4, lower than the previous year due to fewer large transactions [17] Market Data and Key Metrics Changes - ERC (Expected Recoveries) at December 31, 2023, was $6.4 billion, up 12% from $5.7 billion a year prior [30] - Cash collections for Q4 2023 were $410 million, a 5% increase year-over-year, with U.S. collections decreasing by 5% due to lower yields from older vintages [25][26] - European cash collections increased by 5%, with a stable customer payment proportion despite pressures from the cost of living [28][27] Company Strategy and Development Direction - The company is focused on stabilizing performance and driving a turnaround, particularly in U.S. operations, with a new leadership team emphasizing operational excellence and shareholder alignment [9][36] - The strategy includes three pillars: ERC and pricing, operational effectiveness, and expense management, aimed at enhancing profitability [37][54] - The company anticipates strong portfolio investment levels in 2024, driven by increased U.S. portfolio supply and improved pricing [54][39] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges in the first quarter of 2023 but noted significant progress in stabilizing performance throughout the year [9][12] - The outlook for 2024 includes expectations for double-digit growth in cash collections, driven by higher portfolio purchases and improved pricing [55][56] - Management is actively monitoring consumer stress and is prepared to adjust strategies accordingly [29] Other Important Information - The company has a strong capital structure with a debt-to-adjusted EBITDA leverage ratio of 2.89x and $3.2 billion in total committed capital available [32][33] - The company is targeting a return on average tangible equity of 6% to 8% for the full year [56] Q&A Session Summary Question: Long-term call center model and offshore collections - Management indicated it is too early to determine the ultimate balance between U.S. and offshore collections, with ongoing pilots being monitored for performance metrics [62][63] Question: Outlook for U.S. purchase values and seller behavior - Management reported a stable selling environment in the U.S., expecting strong buying and pricing to hold up [66][67] Question: Stockholder equity and return on tangible equity - Management clarified that the return on tangible equity guidance is on an after-tax basis and reflects net income attributable to PRA [73][74] Question: Growth expectations for portfolio income - Management expects portfolio income to grow but at a slightly lower rate than cash collections due to the impact of lower yielding vintages [76][77] Question: Clarification on cash collections and expenses - Management confirmed that cash collections are expected to exceed $1.8 billion, with expenses growing modestly compared to cash collections [81][84] Question: Changes in European market behavior - Management noted no significant change in seller behavior in Europe, with fewer spot transactions affecting the market [90][91]

Enhanced vendor management Dynamic business prioritization Rebalance Resources to Leverage Lower-Cost Locations Expanded relationships with existing third parties Onboarding third parties to support strategic initiatives Offshoring multiple processes to lower-cost locations Launched offshore call center (Q4 2023), with significant expansion planned Leveraging third-party vendors Cost elimination/ restructuring Productivity enhancements Establishing flexibility Lower marginal costs U.S. Portfolio Purchases U ...

Financial Data and Key Metrics - Portfolio purchases in Q3 2023 were $311 million, up 70% YoY, driven by increased forward-flow volumes and spot transactions [40] - Americas investments in Q3 2023 were $232 million, the highest quarterly level since 2017, with US market investment levels increasing for the fourth consecutive quarter [41] - Net interest expense for Q3 2023 was $49 million, up $17 million YoY, primarily due to higher debt balances and increased interest rates [45] - Cash collections for Q3 2023 were $420 million, a 2% increase YoY, with higher collections in Brazil and Europe partially offset by lower collections in the US [45] - ERC (Expected Recoverable Collections) at September 30, 2023, was $6 billion, up 12% YoY, with US ERC increasing by $135 million sequentially [54] Business Line Performance - Americas core vintage purchase price multiple expanded from 1.75x at the end of Q1 2023 to 1.9x by the end of Q3 2023, reflecting improved pricing and returns [42] - European investments in Q3 2023 were $79 million, with stable forward-flow volumes and competitive market conditions [44] - Legal collection costs in Q3 2023 were $21 million, down $3 million YoY, with expectations for Q4 2023 to be in the low to mid $20 million range [52] Market Performance - US credit card charge-off rates are trending higher, reaching 3.2%, indicating continued credit normalization from pandemic-era lows [43] - In Europe, cost-of-living pressures have impacted some markets, leading to fewer large one-time payments, but the proportion of paying customers remains stable [46] - The company expects to collect $1.5 billion of its ERC balance over the next 12 months, with $841 million needed globally to replace runoff and maintain current ERC levels [54] Strategic Direction and Industry Competition - The company is focusing on portfolio supply, pricing, operational effectiveness, and efficiency to drive improved financial performance in 2024 and beyond [32][38] - Operational initiatives include enhancing legal collection activities, leveraging third-party resources, and improving call center productivity [35][36] - The company is exploring offshoring and outsourcing opportunities to reduce costs, with pilot programs underway and expected to expand over the next 12-18 months [37][63] Management Commentary on Operating Environment and Future Outlook - Management is encouraged by the US market, with investment levels and pricing increasing, and expects this to positively impact portfolio income [41] - The company anticipates continued credit normalization, with increased supply and improved pricing driving future cash collections and revenues [34][38] - Management expects the cash efficiency ratio to improve to the low 60s by the end of 2024, driven by higher pricing and efficiency initiatives [38][65] Other Important Information - The company has $3.1 billion in committed capital under its credit facilities, with $1.1 billion of additional availability subject to debt covenants and advance rates [48] - Debt-to-adjusted EBITDA leverage ratio was 2.8x at September 30, 2023, with expectations for leverage to increase slightly as capital is deployed at favorable returns [54] Q&A Session Summary Question: Timeline for improving cash efficiency ratio to the low 60s - The company expects to achieve the low 60s cash efficiency ratio by the end of 2024, driven by higher pricing and efficiency initiatives [1][65] Question: Long-term platform underinvestment and potential rebuild - The company is reviewing its systems architecture and plans to prioritize upgrades over the next 12 months, with a focus on maintaining momentum in operational initiatives [68][69] Question: Consumer credit normalization and its impact on collections - The company sees limited evidence of consumer pressure in the US, with cash collections expected to continue growing as credit normalizes further [14][46] Question: Outsourcing and offshoring strategies - The company is piloting offshoring programs and leveraging third-party resources in the US, with plans to expand these initiatives over the next 6-9 months [63][84] Question: Portfolio purchase outlook and yield improvement - The company expects to see improved portfolio yields over the next 24 months, driven by higher purchase multiples and operational initiatives [60][62] Question: European market performance compared to competitors - The company's European business has consistently performed well, with stable payer rates despite cost-of-living pressures in some markets [80][81] Question: Status of loan covenants and debt availability - The company has $1.1 billion of additional availability under its credit facilities, with no changes to loan covenants following the Q1 2023 event [85][86] Question: Portfolio mix and private label vs. general purpose credit cards - Private label as a percentage of portfolio purchases has declined YoY, with no material change in average balances or collectability [87]

PRA Group Q3 2023 Conference Call Presentation Forward-Looking Statements You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this presentation and are qualified in their entirety by these cautionary statements. 1 Nasdaq: PRAA | --- | --- | --- | |-----------------------------|----------------------------|------------| | | | | | Portfolio Supply & Pricing | Operational Effectiveness | Efficiency | Stable Investments in Europe with Growing Supply in ...

Financial Performance - Total cash collections for Q3 2023 were $419.6 million, an increase of $7.3 million, or 1.8%, compared to $412.3 million in Q3 2022[157]. - Total revenues for the three months ended September 30, 2023, were $216.4 million, a decrease of $28.4 million, or 11.6%, compared to $244.8 million for the same period in 2022[158]. - Total revenues for the nine months ended September 30, 2023, were $581.1 million[155]. - Cash collections for the nine months ended September 30, 2023, totaled $1,250.2 million, a decrease of $87.2 million, or 6.5%, from $1,337.4 million in the same period in 2022[170]. - Net loss attributable to PRA Group, Inc. for Q3 2023 was $12.3 million, or 5.5% of total revenues[155]. - Total portfolio revenue was $212.1 million for the three months ended September 30, 2023, down $22.1 million, or 9.4%, from $234.2 million in the prior year, primarily due to lower cash overperformance and a lack of certain recoveries[159]. - Other revenue decreased to $4.3 million for the three months ended September 30, 2023, a decline of $6.3 million, or 59.4%, compared to $10.6 million in 2022, mainly due to timing of settlements[160]. Cash Collections - Cash collections in Brazil increased by $20.9 million, or 87.8%, in Q3 2023 compared to Q3 2022[157]. - Cash collections in Europe rose by $13.4 million, or 8.7%, in Q3 2023 compared to Q3 2022[157]. - U.S. legal cash collections decreased by $6.1 million, or 8.5%, in Q3 2023 due to lower volumes of accounts placed in the legal channel[157]. - The overall subtotal for cash collections across all segments was $1,615,204 million, indicating a robust performance in the financial year[195]. - The company reported cash collections of $475.5 million for the year 2023, showing a significant increase compared to previous years[199]. - The total cash collections for Europe from 2012 to 2023 amounted to $4,808.3 million, with a subtotal of $4,381.2 million[199]. Portfolio Acquisitions - Total portfolio purchases for Q3 2023 amounted to $311.2 million[154]. - Total portfolio acquisitions in Q3 2023 amounted to $311,183, an increase from $183,104 in Q3 2022[212]. - Major credit card acquisitions in Q3 2023 were $57,045, representing 33.2% of total U.S. portfolio acquisitions[214]. - Fresh accounts, typically past due 120 to 270 days, accounted for $103,432 or 66.0% of total core acquisitions in Q3 2023[215]. - The company invested $850.0 million in portfolio acquisitions in 2022, which generated $109.4 million of cash collections, representing only 6.3% of 2022 cash collections[224]. Operating Expenses and Interest - Operating expenses for the three months ended September 30, 2023, were $173.4 million, a slight decrease of $0.6 million, or 0.4%, from $174.0 million in the same period last year[161]. - Interest expense, net increased to $49.5 million for the three months ended September 30, 2023, up $17.0 million, or 52.4%, compared to $32.5 million in 2022, reflecting a higher average debt balance and interest rates[166]. - Operating expenses for the nine months ended September 30, 2023, were $526.2 million, an increase of $9.0 million, or 1.7%, compared to $517.2 million in the prior year[175]. - Interest expense, net for the nine months ended September 30, 2023, was $130.8 million, an increase of $35.0 million, or 36.6%, compared to $95.8 million in 2022, primarily due to higher debt and interest rates[181]. Cash Efficiency and Ratios - Cash efficiency ratio for Q3 2023 was 58.9%[154]. - The cash efficiency ratio for Q3 2023 was 58.9%, slightly up from 58.4% in Q2 2023[209]. - The Debt to Adjusted EBITDA ratio increased to 2.84x as of September 30, 2023, compared to 2.25x for the year ended December 31, 2022[219]. Goodwill and Impairment - As of September 30, 2023, the company reported goodwill of $412.5 million, primarily from the Debt Buying and Collection (DBC) reporting unit, which accounted for $385.6 million[248]. - The company performed its most recent annual goodwill impairment review on October 1, 2022, concluding that goodwill was not impaired, with the DBC reporting unit's fair value exceeding its carrying value by a substantial margin[249]. - The company identified a heightened risk for future impairment of goodwill allocated to the DBC reporting unit due to macroeconomic conditions, higher interest rates, and recent financial performance[250]. Future Projections - The estimated remaining collections (ERC) as of September 30, 2023, amount to $5,975.6 million, categorized by geographical region[202]. - Total ERC for 2024 is projected at $1,474,521, with a significant contribution from the Americas and Australia Core at $822,339[205]. - The total ERC for 2033 is projected to be $145,548, indicating a declining trend over the years[205]. International Operations - The company generated $111.0 million in revenues from operations outside the U.S. during the three months ended September 30, 2023, using 12 functional currencies[260]. - The company actively monitors the value of finance receivables by currency and may execute re-balancing foreign exchange contracts to align funding and portfolio acquisitions by currency[264].

PRA Group, Inc. (NASDAQ:PRAA) Q2 2023 Earnings Conference Call August 7, 2023 5:00 PM ET Company Participants Najim Mostamand - Vice President, Investor Relations Vikram Atal - President and Chief Executive Officer Pete Graham - Executive Vice President and Chief Financial Officer Conference Call Participants David Scharf - JMP Securities Robert Napoli - William Blair Mark Hughes - Truist Securities Robert Dodd - Raymond James Operator Good afternoon and welcome to the PRA Group's Second Quarter 2023 Confer ...

[Part I. Financial Information](index=3&type=section&id=Part%20I.%20Financial%20Information) [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) PRA Group's unaudited financial statements reveal increased assets and borrowings, significant declines in net income and diluted EPS, and a shift to net cash used in investing activities [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) PRA Group's balance sheet reflects increased total assets, primarily from finance receivables, alongside higher liabilities due to borrowings, and a slight decrease in total equity Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | Change (%) | | :------------------------- | :------------ | :---------------- | :--------- | | Total assets | $4,320,859 | $4,175,674 | +3.47% | | Finance receivables, net | $3,424,548 | $3,295,008 | +3.93% | | Total liabilities | $3,081,185 | $2,888,924 | +6.65% | | Borrowings | $2,739,667 | $2,494,858 | +9.81% | | Total equity | $1,239,674 | $1,286,750 | -3.66% | [Consolidated Income Statements](index=4&type=section&id=Consolidated%20Income%20Statements) PRA Group reported a significant decrease in net income and diluted EPS for both the three and six months ended June 30, 2023, driven by lower revenues and higher interest expense Consolidated Income Statement Highlights (in thousands, except per share amounts) | Metric | 3 Months Ended June 30, 2023 (in thousands) | 3 Months Ended June 30, 2022 (in thousands) | 6 Months Ended June 30, 2023 (in thousands) | 6 Months Ended June 30, 2022 (in thousands) | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total revenues | $209,236 | $258,262 | $364,706 | $498,867 | | Income from operations | $45,561 | $83,737 | $11,917 | $155,704 | | Interest expense, net | $(43,022) | $(31,562) | $(81,305) | $(63,310) | | Net income/(loss) | $1,160 | $39,136 | $(52,743) | $73,754 | | Diluted EPS | $(0.10) | $0.91 | $(1.60) | $1.88 | [Consolidated Statements of Comprehensive Income](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Total comprehensive income for Q2 2023 improved significantly due to positive currency translation, while the six-month period showed a total comprehensive loss Consolidated Statements of Comprehensive Income Highlights (in thousands) | Metric | 3 Months Ended June 30, 2023 (in thousands) | 3 Months Ended June 30, 2022 (in thousands) | 6 Months Ended June 30, 2023 (in thousands) | 6 Months Ended June 30, 2022 (in thousands) | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net income/(loss) | $1,160 | $39,136 | $(52,743) | $73,754 | | Currency translation adjustments | $7,083 | $(115,536) | $5,533 | $(103,266) | | Cash flow hedges | $5,719 | $5,837 | $888 | $24,417 | | Total comprehensive income/(loss) | $13,882 | $(70,805) | $(46,274) | $(5,497) | [Consolidated Statements of Changes in Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Equity) Total equity decreased from December 31, 2022, to June 30, 2023, primarily due to a net loss and negative adjustments from accumulated other comprehensive loss Consolidated Statements of Changes in Equity Highlights (in thousands) | Metric | Balance at Dec 31, 2022 (in thousands) | Balance at Jun 30, 2023 (in thousands) | Change (in thousands) | | :-------------------------------- | :---------------------- | :---------------------- | :----- | | Common Stock | $390 | $392 | +$2 | | Additional Paid-In Capital | $2,172 | $2,541 | +$369 | | Retained Earnings | $1,573,025 | $1,510,592 | $(62,433) | | Accumulated Other Comprehensive Loss | $(347,926) | $(348,000) | $(74) | | Noncontrolling Interest | $59,089 | $74,149 | +$15,060 | | Total Equity | $1,286,750 | $1,239,674 | $(47,076) | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating and investing activities increased for the six months ended June 30, 2023, while net cash provided by financing activities rose significantly Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | 6 Months Ended June 30, 2023 (in thousands) | 6 Months Ended June 30, 2022 (in thousands) | Change (in thousands) | | :-------------------------------- | :--------------------------- | :--------------------------- | :----- | | Net cash provided by/(used in) operating activities | $(80,839) | $(41,764) | $(39,075) | | Net cash provided by/(used in) investing activities | $(93,967) | $147,010 | $(240,977) | | Net cash provided by/(used in) financing activities | $208,496 | $(110,244) | $318,740 | | Net increase/(decrease) in cash and cash equivalents | $39,906 | $(19,956) | $59,862 | | Cash and cash equivalents, end of period | $124,665 | $69,116 | +$55,549 | [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail PRA Group's accounting policies, financial instruments, and specific balance sheet and income statement items, covering global operations, borrowings, and contingencies [1. Organization and Business](index=9&type=section&id=1.%20Organization%20and%20Business) PRA Group is a global financial services company focused on purchasing and managing nonperforming loan portfolios, operating as one accounts receivable management segment - PRA Group's primary business is the purchase, collection, and management of **nonperforming loan portfolios globally**[24](index=24&type=chunk) - The company operates as **one reportable segment**: accounts receivable management, based on similarities in economic characteristics, products, services, and customer types[31](index=31&type=chunk) Revenues by Geographical Location (in thousands) | Geographic Segment | 3 Months Ended June 30, 2023 (in thousands) | 3 Months Ended June 30, 2022 (in thousands) | 6 Months Ended June 30, 2023 (in thousands) | 6 Months Ended June 30, 2022 (in thousands) | | :----------------- | :-------------------------------------- | :-------------------------------------- | :-------------------------------------- | :-------------------------------------- | | U.S. | $94,246 | $136,852 | $153,393 | $288,277 | | United Kingdom | $35,261 | $45,880 | $68,570 | $89,834 | | Brazil | $25,369 | $12,814 | $44,635 | $32,080 | | Other | $54,360 | $62,716 | $98,108 | $88,676 | | Total | $209,236 | $258,262 | $364,706 | $498,867 | [2. Finance Receivables, net](index=10&type=section&id=2.%20Finance%20Receivables%2C%20net) Finance receivables, net, increased, with Q2 2023 showing positive changes in expected recoveries from Europe and South America, but a net negative for the six months due to reduced U.S. call center cash flows Finance Receivables, Net (in thousands) | Metric | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :-------------------- | :------------ | :---------------- | | Finance receivables, net | $3,424,548 | $3,295,008 | - For the three months ended June 30, 2023, changes in expected recoveries were a **net positive $21.1 million**, including **$25.3 million from overperformance** largely from Europe and South America, offset by a $4.2 million negative adjustment to future expected recoveries[45](index=45&type=chunk) - For the six months ended June 30, 2023, changes in expected recoveries were a **net negative $15.8 million**, including $29.2 million from overperformance in Europe and South America, but offset by a **$45.0 million negative adjustment** to future expected recoveries due to weaker U.S. call center performance[56](index=56&type=chunk) [3. Investments](index=15&type=section&id=3.%20Investments) Total investments decreased slightly, primarily comprising available-for-sale debt securities and equity securities, including private equity funds and equity method investments Investments (in thousands) | Investment Type | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :----------------------------- | :------------ | :---------------- | | Debt securities (Available-for-sale) | $62,740 | $66,813 | | Equity securities (Private equity funds) | $3,427 | $4,373 | | Equity method investments | $10,002 | $8,762 | | Total investments | $76,169 | $79,948 | - The Company has an **11.7% interest in RCB Investimentos S.A.**, a servicing platform for nonperforming loans in Brazil, accounted for under the equity method[61](index=61&type=chunk) [4. Goodwill](index=16&type=section&id=4.%20Goodwill) Goodwill decreased primarily due to foreign currency translation adjustments, with the company concluding no impairment in its annual review and no triggering events identified Goodwill (in thousands) | Metric | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :-------------------- | :------------ | :---------------- | | Goodwill | $414,905 | $435,921 | - Goodwill decreased by **$21.02 million** for the six months ended June 30, 2023, primarily due to foreign currency translation adjustments[64](index=64&type=chunk) - The company performs an annual goodwill impairment review as of October 1st and found **no impairment** as of October 1, 2022, with no triggering events by June 30, 2023[63](index=63&type=chunk) [5. Leases](index=16&type=section&id=5.%20Leases) The Company's operating lease portfolio consists of corporate offices and call centers, with total lease expense decreasing for the six months ended June 30, 2023, and lease liabilities totaling $55.72 million Total Lease Expense (in thousands) | Lease Expense | 3 Months Ended June 30, 2023 (in thousands) | 3 Months Ended June 30, 2022 (in thousands) | 6 Months Ended June 30, 2023 (in thousands) | 6 Months Ended June 30, 2022 (in thousands) | | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Operating lease expense | $2,604 | $3,088 | $5,515 | $6,320 | | Short-term lease expense | $566 | $195 | $1,027 | $1,099 | | Sublease income | $(137) | $(115) | $(275) | $(230) | | Total lease expense | $3,033 | $3,168 | $6,267 | $7,189 | - Lease liabilities at June 30, 2023, totaled **$55.72 million**, with **$5.26 million** due in the remaining six months of 2023 and **$10.23 million** due in 2024[68](index=68&type=chunk) [6. Borrowings](index=17&type=section&id=6.%20Borrowings) Total borrowings increased due to higher revolving credit balances and new senior notes, partially offset by convertible note retirement, with the company remaining in compliance with all covenants Borrowings (in thousands) | Borrowing Type | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :---------------------------- | :------------ | :---------------- | | Americas revolving credit | $273,397 | $186,867 | | UK revolving credit | $512,791 | $453,528 | | Europe revolving credit | $476,089 | $419,856 | | Term loan | $445,000 | $450,000 | | Senior notes | $1,046,000 | $650,000 | | Convertible notes | $0 | $345,000 | | Total borrowings | $2,739,667 | $2,494,858 | - The Company issued **$400 million in 8.375% Senior Notes due 2028** and used substantially all proceeds to retire the **$345 million Convertible Senior Notes due 2023**[91](index=91&type=chunk)[101](index=101&type=chunk) - The Company was in **compliance with all covenants** of its financing arrangements as of June 30, 2023[71](index=71&type=chunk) [7. Derivatives](index=21&type=section&id=7.%20Derivatives) The Company uses derivative financial instruments, including interest rate swaps and foreign currency contracts, to manage market exposures, not for speculation, with fair values for assets and liabilities reported - The Company uses interest rate swap agreements, interest rate caps, and foreign currency contracts to reduce exposure to interest rate and foreign currency exchange rate fluctuations, **not for trading or speculative purposes**[102](index=102&type=chunk) Fair Value of Derivative Instruments (in thousands) | Derivative Type | June 30, 2023 (Fair Value, in thousands) | December 31, 2022 (Fair Value, in thousands) | | :----------------------------- | :------------------------- | :----------------------------- | | Interest rate contracts (assets) | $39,795 | $37,305 | | Interest rate contracts (liabilities) | $540 | $0 | | Foreign currency contracts (assets) | $4,966 | $487 | | Foreign currency contracts (liabilities) | $8,576 | $19,120 | - As of June 30, 2023, the notional amount of interest rate contracts designated as cash flow hedges was **$729.5 million**, and foreign currency contracts not designated as hedges was **$1,693.0 million**[103](index=103&type=chunk)[107](index=107&type=chunk) [8. Fair Value](index=22&type=section&id=8.%20Fair%20Value) Financial instruments are categorized into a three-level fair value hierarchy, with fair values estimated using proprietary models, market quotes, or standard valuation models - Fair value measurements are categorized into **Level 1** (quoted prices in active markets), **Level 2** (observable inputs other than Level 1), and **Level 3** (unobservable inputs)[109](index=109&type=chunk) Financial Instruments Not Carried at Fair Value (in thousands) | Instrument | June 30, 2023 (Carrying Amount, in thousands) | June 30, 2023 (Estimated Fair Value, in thousands) | December 31, 2022 (Carrying Amount, in thousands) | December 31, 2022 (Estimated Fair Value, in thousands) | | :---------------------- | :------------------------------ | :----------------------------------- | :---------------------------------- | :----------------------------------- | | Finance receivables, net | $3,424,548 | $3,183,414 | $3,295,008 | $3,167,813 | | Senior Notes | $1,046,000 | $913,620 | $650,000 | $580,433 | | Convertible Notes | $0 | $0 | $345,000 | $341,926 | Financial Instruments Carried at Fair Value (in thousands) | Instrument | June 30, 2023 (Total Fair Value, in thousands) | December 31, 2022 (Total Fair Value, in thousands) | | :------------------------------------ | :------------------------------- | :----------------------------------- | | Government securities | $62,740 | $66,813 | | Derivative contracts (assets) | $44,761 | $37,792 | | Derivative contracts (liabilities) | $9,116 | $19,120 | [9. Accumulated Other Comprehensive Loss](index=24&type=section&id=9.%20Accumulated%20Other%20Comprehensive%20Loss) Accumulated other comprehensive loss remained stable, with a net current period other comprehensive gain for Q2 2023 primarily from cash flow hedges and currency translation adjustments Accumulated Other Comprehensive Loss by Component (in thousands) | Component | Balance at Dec 31, 2022 (in thousands) | Balance at Jun 30, 2023 (in thousands) | | :----------------------- | :---------------------- | :---------------------- | | Debt Securities Available-for-sale | $(237) | $(189) | | Cash Flow Hedges | $27,804 | $28,692 | | Currency Translation Adjustments | $(375,493) | $(376,503) | | Total Accumulated Other Comprehensive Loss | $(347,926) | $(348,000) | - For the three months ended June 30, 2023, net current period other comprehensive gain was **$8.73 million**, driven by **$5.72 million from cash flow hedges** and **$3.09 million from currency translation adjustments**[125](index=125&type=chunk) [10. Earnings per Share](index=25&type=section&id=10.%20Earnings%20per%20Share) Basic and diluted EPS decreased significantly for both the three and six months ended June 30, 2023, reflecting a net loss attributable to PRA Group, Inc Earnings Per Share (EPS) | EPS Metric | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :--------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Basic EPS | $(0.10) | $0.92 | $(1.60) | $1.90 | | Diluted EPS | $(0.10) | $0.91 | $(1.60) | $1.88 | - The Company did not repurchase any common stock during the six months ended June 30, 2023, and had **$67.7 million remaining** for share repurchases under its program[130](index=130&type=chunk) [11. Income Taxes](index=26&type=section&id=11.%20Income%20Taxes) The Company accounts for income taxes using the asset and liability method, intends to indefinitely reinvest international earnings, and is subject to examination for tax years from 2014 onwards - The Company intends to **indefinitely reinvest international earnings**, so no deferred tax liabilities are recorded for unremitted earnings[134](index=134&type=chunk) - Tax years subject to examination by major federal, state, and international taxing jurisdictions are **2014 and subsequent years**[133](index=133&type=chunk) - Cash on hand related to international operations with indefinitely reinvested earnings was **$83.2 million** at June 30, 2023, up from $75.3 million at December 31, 2022[134](index=134&type=chunk) [12. Commitments and Contingencies](index=26&type=section&id=12.%20Commitments%20and%20Contingencies) The Company has various commitments, including employment and forward flow agreements, and is subject to routine legal matters, with reasonably possible losses not material at June 30, 2023 - Estimated future compensation under employment agreements with U.S. executive officers is **$4.4 million**[135](index=135&type=chunk)[137](index=137&type=chunk) - The maximum remaining amount to be purchased under forward flow agreements for nonperforming loans was **$557.7 million** at June 30, 2023, with **$535.0 million** due within the next 12 months[138](index=138&type=chunk)[227](index=227&type=chunk) - The aggregate range of reasonably possible losses in excess of the amount accrued for legal proceedings was **not material** at June 30, 2023[142](index=142&type=chunk) [13. Recently Issued Accounting Standards](index=27&type=section&id=13.%20Recently%20Issued%20Accounting%20Standards) The Company does not anticipate any recently issued accounting pronouncements to have a material effect on its Consolidated Financial Statements - No material effect is expected from recently issued accounting pronouncements on the Consolidated Financial Statements[145](index=145&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's discussion highlights decreased cash collections, total revenues, and net income due to lower purchasing and higher interest rates, noting an increased Debt to Adjusted EBITDA ratio - For the three months ended June 30, 2023, total portfolio purchases were **$327.8 million**, total cash collections were **$419.3 million**, and diluted EPS was **$(0.10)**[151](index=151&type=chunk) - For the six months ended June 30, 2023, total portfolio purchases were **$558.0 million**, total cash collections were **$830.6 million**, and diluted EPS was **$(1.60)**[151](index=151&type=chunk) - Cash collections decreased by **5.6%** for the three months and **10.2%** for the six months ended June 30, 2023, primarily due to lower purchasing levels in recent years, particularly in U.S. call centers and Americas Insolvency[154](index=154&type=chunk)[167](index=167&type=chunk) - Total portfolio revenue decreased by **18.0%** for the three months and **26.9%** for the six months ended June 30, 2023, largely due to lower purchasing, reduced cash overperformance, and a negative adjustment to estimated remaining collections (ERC) for certain U.S. Core portfolios[156](index=156&type=chunk)[169](index=169&type=chunk) - Interest expense, net, increased by **36.3%** for the three months and **28.4%** for the six months ended June 30, 2023, reflecting a higher average debt balance and increased interest rates[163](index=163&type=chunk)[177](index=177&type=chunk) - The company's Debt to Adjusted EBITDA ratio increased to **2.76x** as of June 30, 2023, from 2.25x at December 31, 2022[220](index=220&type=chunk) - Estimated remaining collections (ERC) totaled **$5.90 billion** at June 30, 2023[151](index=151&type=chunk)[197](index=197&type=chunk) Quarterly Cash Collections by Geography and Type (in thousands) | Quarter | Americas and Australia Core (in thousands) | Americas Insolvency (in thousands) | Europe Core (in thousands) | Europe Insolvency (in thousands) | Total Cash Collections (in thousands) | | :------ | :-------------------------- | :------------------ | :---------- | :---------------- | :--------------------- | | 2023 Q2 | $220,886 | $26,384 | $149,324 | $22,725 | $419,319 | | 2023 Q1 | $227,960 | $25,751 | $134,005 | $23,568 | $411,284 | | 2022 Q4 | $205,619 | $27,971 | $134,016 | $24,051 | $391,657 | | 2022 Q3 | $225,775 | $31,911 | $132,072 | $22,586 | $412,344 | | 2022 Q2 | $244,377 | $34,278 | $142,470 | $22,935 | $444,060 | | 2022 Q1 | $270,284 | $35,209 | $151,162 | $24,325 | $480,980 | Quarterly Portfolio Acquisitions by Geography and Type (in thousands) | Quarter | Americas and Australia Core (in thousands) | Americas Insolvency (in thousands) | Europe Core (in thousands) | Europe Insolvency (in thousands) | Total Portfolio Acquisitions (in thousands) | | :------ | :-------------------------- | :------------------ | :---------- | :---------------- | :--------------------------- | | 2023 Q2 | $171,440 | $12,189 | $136,834 | $7,296 | $327,759 | | 2023 Q1 | $116,867 | $15,701 | $90,454 | $7,203 | $230,225 | | 2022 Q4 | $118,581 | $8,967 | $140,011 | $20,535 | $288,094 | | 2022 Q3 | $100,780 | $8,988 | $59,426 | $13,910 | $183,104 | | 2022 Q2 | $99,962 | $6,369 | $123,814 | $1,202 | $231,347 | | 2022 Q1 | $90,639 | $9,118 | $38,764 | $8,929 | $147,450 | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=49&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The Company is exposed to interest rate and currency exchange risks, which it mitigates using derivative financial instruments like interest rate and currency derivatives, hedging 62% of its variable rate debt - The Company is subject to interest rate risk from approximately **$1.7 billion in variable rate credit facilities** as of June 30, 2023, where a 50 basis point increase/decrease in interest rates would change interest expense by an estimated **$5.4 million** over 12 months[255](index=255&type=chunk) - To mitigate interest rate risk, the Company uses interest rate derivative contracts, **hedging 62% of its notional variable rate debt** as of June 30, 2023[256](index=256&type=chunk) - International operations expose the Company to currency exchange risk, with **$115.0 million in non-U.S. revenues** in Q2 2023 across 12 functional currencies, mitigated by multi-currency credit facilities and re-balancing foreign exchange contracts[257](index=257&type=chunk)[261](index=261&type=chunk) [Item 4. Controls and Procedures](index=50&type=section&id=Item%204.%20Controls%20and%20Procedures) The Company's disclosure controls and procedures were deemed effective as of June 30, 2023, with no material changes in internal control over financial reporting during the quarter - The Company's disclosure controls and procedures were **effective** as of June 30, 2023[262](index=262&type=chunk) - No **material changes in internal control over financial reporting** occurred during the quarter ended June 30, 2023[263](index=263&type=chunk) [Part II. Other Information](index=51&type=section&id=Part%20II.%20Other%20Information) [Item 1. Legal Proceedings](index=51&type=section&id=Item%201.%20Legal%20Proceedings) No material developments occurred in previously disclosed legal proceedings, nor were there any new material legal proceedings during the six months ended June 30, 2023 - No material developments in legal proceedings disclosed in the 2022 Form 10-K or March 31, 2023, 10-Q, and no new material legal proceedings during the six months ended June 30, 2023[144](index=144&type=chunk) [Item 1A. Risk Factors](index=51&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes in the Company's risk factors from those disclosed in its 2022 Form 10-K - No material changes in risk factors from the 2022 Form 10-K[267](index=267&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=51&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The Company made no common stock repurchases during Q2 2023, with $67.7 million remaining in its share repurchase program, and does not currently pay regular dividends - No common stock repurchases were made during Q2 2023[268](index=268&type=chunk) - **$67.7 million remained** for share repurchases under the $150.0 million program as of June 30, 2023[230](index=230&type=chunk) - The Company does not currently pay regular dividends on its common stock[269](index=269&type=chunk) [Item 3. Defaults Upon Senior Securities](index=51&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities - No defaults upon senior securities[270](index=270&type=chunk) [Item 4. Mine Safety Disclosures](index=51&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the Company - Not applicable[271](index=271&type=chunk) [Item 5. Other Information](index=51&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted or terminated Rule 10b5-1 trading arrangements during the three months ended June 30, 2023 - No Rule 10b5-1 trading arrangements were adopted or terminated by directors or officers during Q2 2023[272](index=272&type=chunk) [Item 6. Exhibits](index=51&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including corporate organizational documents, indentures for senior notes, certifications, and XBRL interactive data files - The exhibits include the Fifth Amended and Restated Certificate of Incorporation, Amended and Restated By-Laws, various Indentures for Senior Notes (2029, 2028, 2025), and certifications by the CEO and CFO[273](index=273&type=chunk)[274](index=274&type=chunk)