PRA (PRAA) - 2025 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section details the company's financial statements, notes, and management's analysis of financial condition and results Financial Statements This section presents the unaudited Consolidated Financial Statements for Q1 2025, including key financial statements and detailed explanatory notes Consolidated Balance Sheets Total assets increased to $5.15 billion as of March 31, 2025, from $4.93 billion at year-end 2024, primarily driven by a rise in Finance receivables, net Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total assets | $5,148,069 | $4,931,155 | | Finance receivables, net | $4,308,334 | $4,140,742 | | Goodwill | $420,715 | $396,357 | | Total liabilities | $3,867,551 | $3,737,548 | | Borrowings | $3,466,075 | $3,326,621 | | Total equity | $1,280,518 | $1,193,607 | Consolidated Income Statements For the three months ended March 31, 2025, total revenues increased by 5.5% year-over-year to $269.6 million, while net income remained relatively flat at $3.7 million Q1 2025 vs Q1 2024 Income Statement (in thousands, except per share) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total revenues | $269,619 | $255,586 | | Income from operations | $74,577 | $66,396 | | Interest expense, net | ($60,970) | ($52,278) | | Net income attributable to PRA Group, Inc. | $3,659 | $3,475 | | Diluted EPS | $0.09 | $0.09 | Consolidated Statements of Cash Flows Net cash used in operating activities improved to $52.6 million in Q1 2025, while net cash provided by financing activities increased to $85.6 million Cash Flow Summary (in thousands) | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | ($52,580) | ($72,999) | | Net cash (used in)/provided by investing activities | ($24,385) | $15,211 | | Net cash provided by financing activities | $85,630 | $52,822 | | Net increase/(decrease) in cash | $22,881 | ($4,105) | Notes to Consolidated Financial Statements The notes detail the company's operations, accounting policies, and financial instrument balances, including increased finance receivables and borrowings - The company's primary business is the purchase, collection, and management of nonperforming loan portfolios across the Americas, Europe, and Australia[21] - Finance receivables, net, increased to $4.31 billion at March 31, 2025, from $4.14 billion at year-end 2024, driven by $291.7 million in new purchases and positive foreign currency adjustments, partially offset by $265.1 million in recoveries[25] - Changes in expected recoveries for Q1 2025 were $27.9 million, a significant decrease from $51.7 million in Q1 2024, with the 2025 amount including $16.5 million from collections overperformance, mainly in Europe and Brazil[30][31] - The company has one reportable segment: Accounts Receivable Management (ARM)[52] - Subsequent to the quarter end, in April 2025, the company completed the sale of its 11.7% interest in RCB Investimentos S.A. and expects to record a pre-tax gain of approximately $38.0 million in Q2 2025[58] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the Q1 2025 results, highlighting an 18.7% increase in portfolio purchases and a 10.7% rise in cash collections year-over-year Executive Overview Q1 2025 saw significant growth in portfolio purchases and cash collections, leading to a record Estimated Remaining Collections (ERC) of $7.8 billion Q1 2025 Key Metrics vs. Q1 2024 | Metric | Q1 2025 | Change vs. Q1 2024 | | :--- | :--- | :--- | | Portfolio purchases | $291.7 million | +18.7% | | Cash collections | $497.4 million | +10.7% | | Estimated remaining collections (ERC) | $7.8 billion | +20.1% | | Net income attributable to PRA Group, Inc. | $3.7 million | +5.3% | | Diluted EPS | $0.09 | Unchanged | - In the U.S., portfolio purchases were $161.0 million, and U.S. legal collections increased 32.6% YoY to $111.2 million, driven by optimization efforts and higher purchasing levels[72] - In Europe, portfolio purchases increased significantly by $64.2 million YoY to $113.2 million, and cash collections overperformed expectations, rising 10.8% to $185.6 million[74] Results of Operations Comparing Q1 2025 to Q1 2024, total portfolio purchases rose 18.7% to $291.7 million, and total cash collections grew 10.7% to $497.4 million Portfolio Purchases by Region (in thousands) | Region | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Total Americas and Australia | $178,456 | $196,816 | (9.3)% | | Total Europe | $113,246 | $49,001 | 131.1% | | Total | $291,702 | $245,817 | 18.7% | Cash Collections by Region (in thousands) | Region | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Total Americas and Australia | $311,860 | $282,070 | 10.6% | | Total Europe | $185,576 | $167,448 | 10.8% | | Total | $497,436 | $449,518 | 10.7% | - Total portfolio revenue increased by 6.0% YoY, driven by a 19.3% increase in portfolio income, but tempered by a 46.0% decrease in 'Changes in expected recoveries'[80] - Legal collection costs and fees increased by 25.1% and 25.7% respectively, due to increased activity in the U.S. legal collections channel[82][83] Liquidity and Capital Resources The company manages liquidity through cash on hand, borrowings, and operational cash flow, with $918.9 million in total borrowing availability as of March 31, 2025 Borrowing Availability as of March 31, 2025 (in thousands) | Facility | Borrowings | Total Availability | | :--- | :--- | :--- | | North American revolving credit facility | $621,495 | $453,505 | | UK revolving credit facility | $474,091 | $250,909 | | European revolving credit facility | $615,133 | $214,508 | | Total | $3,466,075 | $918,922 | - The company has forward flow agreements with an estimated purchase price of approximately $347.0 million over the next 12 months[127] - As of March 31, 2025, $67.7 million remained available for share repurchases under the existing program, though no repurchases were made in Q1 2025[132] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks are interest rate and foreign currency exposure, with no material changes reported since December 31, 2024 - As of March 31, 2025, 58% of the company's $3.5 billion in total borrowings was either fixed rate or hedged to a fixed rate[147] - Revenues from non-U.S. operations totaled $133.2 million in Q1 2025, highlighting the company's exposure to foreign currency fluctuations[148] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2025, with no material changes in internal control over financial reporting - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of March 31, 2025[149] - No changes occurred during Q1 2025 that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[150] PART II. OTHER INFORMATION This section provides additional information on legal proceedings, risk factors, and equity security sales Legal Proceedings This section refers to Note 11 of the Consolidated Financial Statements for information regarding legal proceedings, indicating no material developments as of March 31, 2025 - For information on legal proceedings, the report refers to Note 11 of the financial statements[152] - As of March 31, 2025, there were no material developments in any of the previously disclosed legal proceedings[51] Risk Factors The company states that there have been no material changes to its risk factors from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2024 - There have been no material changes in risk factors from those disclosed in the 2024 Form 10-K[153] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None[154]