PRA (PRAA) - 2020 Q4 - Annual Report

Part I Business Overview PRA Group is a global financial services company specializing in purchasing, collecting, and managing nonperforming loan portfolios - PRA Group's primary business is the purchase, collection, and management of portfolios of nonperforming loans[17] - The company operates globally in the Americas, Europe, and Australia, with one reportable segment[16][19] - Loan portfolios are categorized into Core (nonperforming loans not in insolvent status) and Insolvency (accounts in bankruptcy/insolvency proceedings)[17] - Fee-based services include class action claims recoveries and servicing consumer bankruptcy accounts in the U.S[17][29] - As of December 31, 2020, PRA Group employed 3,820 full-time equivalents globally[37] Risk Factors The company faces operational, economic, regulatory, and financial risks, including pandemic impacts and debt leverage - The COVID-19 pandemic could adversely affect business, operations, and financial results through economic disruption and consumers' inability to pay[14][44][47] - Deterioration in economic or inflationary environments could increase personal bankruptcy filings and adversely impact collections[45] - Inability to continually replace nonperforming loan portfolios at appropriate prices could lead to reduced profitability and operational inefficiencies[49][50][51] - International operations expose the company to risks including adverse economic/political conditions, currency fluctuations, and compliance with diverse international laws[60][62][64] - The UK's exit from the EU (Brexit) creates uncertainty regarding taxes, foreign currency, and regulatory conditions, potentially impacting the company's UK portfolios (26% of consolidated ERC as of Dec 31, 2020)[65][66] - Compliance failures with federal, state, and international collection laws could result in enforcement actions, fines, penalties, and reputational damage[33][34][42][69][70] - The company is subject to investigations by governmental authorities like the CFPB and multi-state Attorneys General, which could lead to business practice changes, fines, or litigation[76][77][78] - Substantial debt leverage (total consolidated indebtedness of approximately $2.7 billion as of Dec 31, 2020) could make it difficult to satisfy obligations and limit financing options[81][82] - Cybersecurity incidents or failures of information technology infrastructure could disrupt operations, compromise confidential information, and damage reputation[87][88][89][90] Unresolved Staff Comments There are no unresolved staff comments from the SEC - No unresolved staff comments[91] Properties PRA Group's corporate headquarters are in Norfolk, Virginia, with operational centers across the Americas, Europe, and Australia - Corporate headquarters and primary domestic operations facilities are in Norfolk, Virginia[92] - As of December 31, 2020, operational centers included 12 leased and 3 owned facilities in the Americas, 11 leased facilities in Europe, and one leased facility in Australia[92] Legal Proceedings PRA Group is routinely involved in legal and regulatory claims, accruing for probable liabilities, with no material excess losses as of December 31, 2020 - The company is subject to routine legal and regulatory claims, inquiries, and proceedings, including lawsuits and counterclaims from customers[93] - Accruals are established for potential liabilities when a loss is probable and estimable[58][456] - The estimated aggregate range of reasonably possible losses in excess of accrued amounts for legal proceedings was not material as of December 31, 2020[457] Mine Safety Disclosure This item is not applicable to PRA Group, Inc - Not applicable[95] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities PRA Group's common stock trades on Nasdaq, with no regular dividends paid in the last three years and no recent share repurchases - Common stock is traded on the Nasdaq Global Select Market under the symbol "PRAA"[3] - The company did not pay regular dividends on its common stock in the three years ended December 31, 2020[102] - No recent sales of unregistered securities or share repurchase programs were reported[103][105] Stock Performance (December 31, 2015 to December 31, 2020) | Ticker | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | PRA Group, Inc. (PRAA) | $100 | $113 | $96 | $70 | $105 | $114 | | Nasdaq Financial 100 (IXF) | $100 | $126 | $146 | $134 | $173 | $179 | | Nasdaq Global Market Composite Index (NQGM) | $100 | $96 | $120 | $112 | $155 | $255 | Selected Financial Data No selected financial data is presented in this item - No selected financial data is provided in this item[106] Management's Discussion and Analysis of Financial Condition and Results of Operations This section analyzes PRA Group's financial condition and operations, including COVID-19 impacts, revenue trends, liquidity, and cash flow Overview PRA Group Inc. is a global financial and business services company focused on purchasing, collecting, and managing nonperforming loans - PRA Group is a global financial and business services company with operations in the Americas, Europe, and Australia[108] - The company's primary business is the purchase, collection, and management of portfolios of nonperforming loans[108] COVID-19 Impact The COVID-19 pandemic impacted PRA Group's operations in 2020, affecting staffing, collections, legal costs, and portfolio purchases - U.S. staffing was reduced in mid-March 2020 but returned to near normal levels by the end of April[111] - U.S. Core cash collections increased, believed to be due to consumers having additional discretionary funds and willingness to resolve debts[111] - Legal collection costs decreased due to a temporary pause in transitioning U.S. accounts to legal status and the closure of courts in many European countries[111] - Portfolio purchases decreased due to deferrals by sellers and lower levels of bankruptcy filings and charge-offs[111] - Funds from operations, cash collections, existing cash, and available borrowings were sufficient to finance operations and commitments during the pandemic[111] Frequently Used Terms This section defines key terminology used in the Form 10-K to ensure clear understanding of financial and operational reporting - Provides definitions for key financial and operational terms used in the Form 10-K, including 'Cash collections', 'Core' and 'Insolvency' portfolios, and 'Estimated remaining collections (ERC)'[115] - Clarifies revenue recognition terms such as 'Portfolio income' and 'Changes in expected recoveries' under the new accounting standards[115] Results of Operations In 2020, total revenues increased by 4.7% to $1,065.4 million, with net income surging by 73.3% to $149.3 million Consolidated Income