PRA (US:PRAA)2023-02-27 23:20Business Operations - PRA Group Inc. operates in the purchase, collection, and management of nonperforming loans, focusing on Core and Insolvency portfolios[16]. - The company has expanded through acquisitions, including the purchase of Aktiv Kapital AS in 2014 and a 55% stake in RCB Investimentos S.A. in 2015, which established operations in Brazil[17]. - As of December 31, 2022, PRA Group employed 3,277 full-time equivalents globally, with 73% in the Americas and Australia and 27% in Europe[36]. - The company has an 11.7% equity interest in RCB, a servicer of nonperforming loans in Brazil[27]. - PRA Group's collection operations utilize internally staffed call centers in higher volume markets and external vendors in newer or less consistent markets[22]. - The company has developed digital capabilities to support collection efforts across all operating markets, enhancing inbound and outbound collections[26]. Financial Performance - Total cash collections for 2022 were $1,729.1 million, a decrease of $332.6 million, or 16.1%, compared to $2,061.7 million in 2021[112]. - Portfolio income for 2022 was $772.3 million, down $103.0 million, or 11.8%, from $875.3 million in 2021[114]. - Total portfolio revenue decreased to $941.2 million in 2022, a decline of $132.0 million, or 12.3%, compared to $1,073.2 million in 2021[115]. - Operating expenses for 2022 were $680.7 million, a decrease of $40.0 million, or 5.6%, from $720.7 million in 2021[117]. - Net income attributable to PRA Group, Inc. was $117.1 million in 2022, representing 12.1% of total revenues, compared to $183.2 million, or 16.7%, in 2021[111]. - The cash efficiency ratio was reported at 61.0%, reflecting the company's ability to convert collections into cash[107]. - Total revenue for PRA Group in 2022 was $941.2 million, with a net finance receivables amounting to $3.295 billion as of December 31, 2022[139]. Economic and Regulatory Risks - The company faces risks from economic deterioration and inflation, which could adversely affect its business and operating results[42]. - A significant rise in personal bankruptcy and insolvency filings could impact the company's ability to collect on nonperforming loans[43]. - The availability of nonperforming loan portfolios at appropriate prices is dependent on high levels of consumer debt obligations and market conditions[48]. - Heightened regulation in the credit card and consumer lending industry may lead to decreased availability of credit to consumers, affecting future nonperforming loans[49]. - Legal and regulatory compliance is critical, as failure to adhere to laws could limit the company's ability to collect on nonperforming loans[64]. - International operations expose the company to various risks, including political and economic conditions that could negatively impact business[58]. - New international regulations, such as the OECD Pillar Two Directive, could significantly increase the company's tax liabilities starting January 1, 2024[63]. Debt and Financing - As of December 31, 2022, the company had total consolidated indebtedness of approximately $2.5 billion, with $1.6 billion in committed revolving borrowing capacity available under credit facilities[78]. - The company’s existing indebtedness includes $345 million in 3.50% Convertible Notes due 2023, $300 million in 7.375% Senior Notes due 2025, and $350 million in 5.00% Senior Notes due 2029[78]. - The company’s ability to generate sufficient cash flow from operations to meet debt obligations is uncertain and may be affected by economic conditions and operational performance[81]. - The company’s credit facilities and indentures contain restrictive covenants that may limit operational flexibility and affect business activities[82]. - The debt to adjusted EBITDA ratio increased to 2.25x in 2022 from 1.89x in 2021, indicating a higher leverage position[174]. Operational Challenges - Seasonal trends affect customer payment patterns, with cash collections typically higher in the first half of the year due to income tax refunds in the U.S.[29]. - The company anticipates an increase in charge-offs, which may lead to a greater supply of portfolios available for purchase in the coming months[105]. - The company reported changes in expected recoveries amounting to $44.6 million across all regions in 2022[139]. - The company has noted that customer payment patterns are influenced by seasonal employment trends and tax refund cycles, particularly in the U.S.[150]. International Operations - The company generated $445.8 million in revenues from operations outside the U.S. in 2022, utilizing 12 functional currencies[208]. - Fluctuations in foreign currencies could adversely affect the company's comprehensive income and stockholders' equity[209]. - Foreign currency gains and losses are included in Other income and (expense) in the Consolidated Income Statements[210]. - The company has organized its European operations to mitigate the impact of foreign currency fluctuations[212]. Shareholder Activities - The company has a share repurchase program authorized for up to $150.0 million, although no repurchases were made during the fourth quarter of 2022[102]. - The company repurchased 2,331,364 shares of common stock for approximately $99.4 million during the year ended December 31, 2022, with $67.7 million remaining for future repurchases[183].