Pra Group, Inc. · NASDAQ:PRAA
Pra — Investor Presentation (September 2022)
41 slides from Pra's investor presentation, Sep 14, 2022
Slide 1: A Global Leader in Acquiring and Collecting Nonperforming Loans
1 SEPTEMBER 2022 INVESTOR PRESENTATION A Global Leader in Acquiring and Collecting Nonperforming Loans Nasdaq: PRAA
Slide 2: Forward-Looking Statements
2 Nasdaq: PRAA FORWARD-LOOKING STATEMENTS Statements in this presentation, other than statements of historical fact, are forward-looking statements, which are based on our current beliefs, projections, assumptions and expectations concerning future operations and financial performance. Such statemen
Slide 3: Agenda
3 Market Overview Company Overview Industry Overview Financial Overview AGENDA Appendix Investing In PRA
Slide 4: The Nonperforming Loan (NPL) Industry
4 Nasdaq: PRAA THE NONPERFORMING LOAN (NPL) INDUSTRY CORE NONPERFORMING LOAN PURCHASING INSOLVENCY NONPERFORMING LOAN PURCHASING Originator Sells Accounts Consumer Files for Bankruptcy Charged-Off or Written Down Originating Creditor Originator Sells Accounts Charged-Off or Written Down Originating
Slide 5: PRA's Role in the Economy
5 Nasdaq: PRAA PRA’S ROLE IN THE ECONOMY Asset Types: Major credit cards Private label credit cards Auto Loans Personal loans Consumer opens a line of credit with creditor Consumer fails to make timely payments and becomes delinquent Creditor attempts to collect delinquent payments If unsucc
Slide 6: Agenda
6 AGENDA Market Overview Company Overview Industry Overview Financial Overview Appendix Investing In PRA
Slide 7: A Global Leader with a Proven Track Record of Success
7 Nasdaq: PRAA A GLOBAL LEADER WITH A PROVEN TRACK RECORD OF SUCCESS 18 Countries $972 million Portfolio Purchases (LTM) $5.6 billion Estimated Remaining Collections (ERC)1 25+ Years in Business 3,000+ Employees Worldwide (as of June 30, 2022) 1. Estimated remaining collections (ERC) refers to the s
Slide 8: PRA Group History
8 Nasdaq: PRAA PRA GROUP HISTORY 2004 Diversified U.S. portfolio into acquisition and servicing of bankruptcy claims 1996 Portfolio Recovery Associates, LLC founded by Steve Fredrickson and Kevin Stevenson 2002 IPO (Nasdaq: PRAA) 2010 Diversified into class action claims servicing 2012 Entered UK ma
Slide 9: One of the Largest Debt Buyers in the U.S.
9 Nasdaq: PRAA ONE OF THE LARGEST DEBT BUYERS IN THE U.S. 25+ year track record as a key buyer in one of the world’s largest NPL markets Multifaceted and comprehensive focus on compliance Stable trends in supply and returns Strong seller relationships
Slide 10: Continuing to Expand with Discipline in Europe
10 Nasdaq: PRAA CONTINUING TO EXPAND WITH DISCIPLINE IN EUROPE 15 locations with over 850 FTEs Own portfolios in 13 countries, with UK as our largest market Strong seller relationships 29-year track record1 1. Includes Aktiv Kapital’s history prior to its acquisition by PRA Group in 2014.
Slide 11: Committed to Continue Growing in Australia
11 COMMITTED TO CONTINUE GROWING IN AUSTRALIA Operation fully running & ready to scale Large number of sellers Long term focus with a disciplined investment approach
Slide 12: Agenda
12 AGENDA Market Overview Company Overview Industry Overview Financial Overview Appendix Investing In PRA
Slide 13: More Supply for PRA
13 More Supply for PRA • As more consumers default on their obligations and debt sellers dispose of their charged-off portfolios, we are in a strong financial position to acquire these portfolios and grow our collections, revenue, and profitability Higher Charge-off Rates • U.S. Credit card charge-o
Slide 14: European Central Bank Ruling Expected to Lead to More Charge-Offs
14 Nasdaq: PRAA EUROPEAN CENTRAL BANK (ECB) RULING EXPECTED TO LEAD TO MORE CHARGE-OFFS Two-thirds of the countries that experienced high NPL levels had not resolved them seven years after the Global Financial Crisis (2007-2011)* In 2019, NPL Backstop Rule was created, providing a timeline of th
Slide 15: Strong Cash Generation Throughout the Credit Cycle
15 Nasdaq: PRAA $0 $500 $1,000 $1,500 $2,000 $2,500 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 1H 2022 Americas and Australia Core Cash Collections Europe Core Cash Collections Insolvency Cash Collections Fee Income STRONG CASH GENERATION THROUGHOUT THE CREDIT CY
Slide 16: Agenda
16 AGENDA Market Overview Company Overview Industry Overview Financial Overview Appendix Investing In PRA
Slide 17: Q2 2022 Financial Results
17 Nasdaq: PRAA Q2 2022 FINANCIAL RESULTS CONTINUED OPERATIONAL SAVINGS DESPITE DECREASED REVENUES AFTER RECORD YEAR ($ in millions, except per share results) Q2 2021 vs Q2 2022 Operating Expenses Total Revenues Q2 2021 $181 Q2 2022 $175 -4% Q2 2022Q2 2021 $286 $258 -10% Net Income Attributable to P
Slide 18: Cash Collections
18 Nasdaq: PRAA Americas & Australia Core, $324.8 Americas Insolvency, $37.8 Europe Core, $157.6 Europe Insolvency, $23.6 CASH COLLECTIONS ($ in millions) Americas & Australia Core, $244.4 Americas Insolvency, $34.3 Europe Core, $142.5 Europe Insolvency, $22.9 Second Quarter 2021 Second Quarter 2022
Slide 19: ERC Is Diversified with 52% in Europe and 41% in U.S.
19 Nasdaq: PRAA United States, $2,256 United Kingdom, $1,436 Central Europe, $593 Northern Europe, $715 Other Americas and Australia, $436 Southern Europe, $134 ERC IS DIVERSIFIED WITH 52% IN EUROPE AND 41% IN U.S. ~$300 MILLION FX IMPACT COMPARED TO Q1 20221 ($ in millions) as of June 30, 2022as of
Slide 20: Substantial Improvement in Cash Efficiency Ratio Over the Years
20 Nasdaq: PRAA ($ in millions, Cash efficiency ratio = (cash receipts – operating expenses)/cash receipts) SUBSTANTIAL IMPROVEMENT IN CASH EFFICIENCY RATIO OVER THE YEARS $261 $298 $383 $433 $592 $762 $971 $1,214 $1,444 $1,604 $1,569 $1,538 $1,640 $1,857 $2,015 $2,076 $933 55.5% 53.8% 63.0% 61.2% 6
Slide 21: Collection Strategies
21 Nasdaq: PRAA Collection Strategies WE USE DATA & ANALYTICS TO DETERMINE THE MOST EFFICIENT COLLECTION STRATEGY Customer’s Ability vs. Willingness To Pay Digital Call Center Legal Letters Legal Channel Settlement Offer Hardship Programs Low Priority Willingness Ab ilit y Single Payment Payment Pla
Slide 22: Strong and Conservative Capital Structure
22 Nasdaq: PRAA STRONG AND CONSERVATIVE CAPITAL STRUCTURE ($ in millions) *Please refer to the reconciliation of this non-GAAP metric to the most applicable GAAP metric at the end of this presentation. $2,609 $2,482 1.89x 2.03x 1.5 1.7 1.9 2.1 2.3 2.5 2.7 2.9 $2,000 $2,100 $2,200 $2,300 $2,400 $2,50
Slide 23: Share Repurchase Program
23 Nasdaq: PRAA SHARE REPURCHASE PROGRAM Repurchased $35 million, or 808 thousand shares, of our common stock in Q2 2022 Repurchased 14% of outstanding common shares since we began buying back shares in 2021 $93 million remained in our share repurchase authorization
Slide 24: Agenda
24 Market Overview Company Overview Industry Overview Financial Overview Appendix Investing In PRA AGENDA
Slide 25: Strategies That Will Continue to Drive Our Future
25 Nasdaq: PRAA STRATEGIES THAT WILL CONTINUE TO DRIVE OUR FUTURE Modernizing collections and improving efficiency at all levels Expanding products and market share Being a recognized and trusted brand Fostering a high- performing workforce
Slide 26: Capital Allocation Strategy
26 Nasdaq: PRAA CAPITAL ALLOCATION STRATEGY TAKING A LONG-TERM APPROACH TO GENERATE STRONG RETURNS FOR SHAREHOLDERS Portfolio Purchases Purchased $379 million of portfolios in first half of 2022 Well-positioned in the credit cycle to take advantage of additional supply Share Repurchase Program
Slide 27: Seasoned Management Team
27 Nasdaq: PRAA SEASONED MANAGEMENT TEAM WITH A LONG TENURE AND STRONG TRACK RECORD OF SUCCESS Kevin Stevenson President, CEO and Co-Founder Pete Graham Chief Financial Officer 6 years at PRA Chris Graves Global Investments and Analytics Officer 16 years at PRA Chris Lagow General Counsel and Assist
Slide 28: How We Have Grown Shareholder Value Over Time
28 Nasdaq: PRAA HOW WE HAVE GROWN SHAREHOLDER VALUE OVER TIME ($ in millions), Adjusted EBITDA per share = Adjusted EBITDA/diluted shares outstanding $0 $5 $10 $15 $20 $25 $30 $35 $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Slide 29: Why Invest Now in PRA?
29 Nasdaq: PRAA WHY INVEST NOW IN PRA? Experienced multiple economic cycles with a long history of substantial cash receipts Geographical diversification enables effective allocation of capital across the globe when opportunities arise Global Footprint Experienced and Tenured Management 25+ Year
Slide 30: Agenda
30 AGENDA Market Overview Company Overview Industry Overview Financial Overview Appendix Investing In PRA
Slide 31: Americas and Australia Selected Results
31 Nasdaq: PRAA $2,872 $3,007 $2,903 $3,315 $3,682 $3,824 $3,269 $2,857 $2,693 $1,211 $1,189 $1,087 $1,083 $1,153 $1,322 $1,427 $1,354 $584 2014 2015 2016 2017 2018 2019 2020 2021 1H 2022 $560 $514 $535 $821 $757 $652 $497 $496 $206 AMERICAS AND AUSTRALIA SELECTED RESULTS 2014 THROUGH JUNE 30, 2022
Slide 32: Europe Selected Results
32 Nasdaq: PRAA $167 $351 $405 $429 $472 $519 $579 $708 $341 2014 2015 2016 2017 2018 2019 2020 2021 1H 2022 $145 $450 $371 $288 $361 $589 $408 $477 $173 $1,494 $2,000 $2,145 $2,389 $2,461 $2,931 $3,187 $3,149 $2,878 EUROPE SELECTED RESULTS 2014 THROUGH JUNE 30, 2022 Cash Collections Portfolio Purch
Slide 33: Deploying Capital Purchasing NPLs
33 Nasdaq: PRAA DEPLOYING CAPITAL PURCHASING NPLS ($ in millions, excludes portfolios associated with business acquisitions) $112 $264 $280 $289 $367 $408 $470 $657 $705 $964 $905 $1,109 $1,118 $1,241 $905 $972 $379 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 1H 2
Slide 34: Components of Total Portfolio Revenue
34 Nasdaq: PRAA COMPONENTS OF TOTAL PORTFOLIO REVENUE Total Portfolio Revenue Portfolio Income Effective interest rate x Finance receivables, net Changes in Expected Recoveries Recoveries in excess of forecast1 Changes in expected future recoveries2 Total Portfolio Revenue has two components Portf
Slide 35: The Basis of Portfolio Income
35 Nasdaq: PRAA Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Total Cash Collections 376 478 374 289 224 173 117 82 55 32 2,200 Effective Interest Rate 28.8% 28.8% 28.8% 28.8% 28.8% 28.8% 28.8% 28.8% 28.8% 28.8% Portfolio Income (Finance Receivables, net x Effective Interest
Slide 36: What Happens When Cash Is Not Collected as Expected
36 Nasdaq: PRAA WHAT HAPPENS WHEN CASH IS NOT COLLECTED AS EXPECTED THERE IS ALWAYS SOME LEVEL OF CHANGES IN EXPECTED RECOVERIES Note: Once the yield is set it will never change. Write-ups or write-downs will change finance receivables, net. Collecting More Cash Than Expected (Overperformance) Colle
Slide 37: PRA Cares – Mission, Vision & Core Values
37 Nasdaq: PRAA PRA CARES – MISSION, VISION & CORE VALUES Our mission is to deliver nonperforming loan solutions that drive success through a long-term focus and customer care. Our vision is to be the trusted leader, changing the world’s perception of the nonperforming loan industry. COMMITTED to al
Slide 38: Our ESG Approach
38 Nasdaq: PRAA OUR ESG APPROACH Environmental Energy efficiency Waste reduction Water conservation Indoor air quality Greenhouse Gas (GHG) emissions mitigation Social Employee engagement Community engagement Talent development Diversity, Equity, and Inclusion (DEI) Equitable com
Slide 39: Reconciliation of Non-GAAP Financial Measures to GAAP
39 Nasdaq: PRAA RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP ($ in millions) Use of Non-GAAP Financial Measures PRA Group, Inc. reports financial results in accordance with U.S. generally accepted accounting principles (GAAP). However, management uses certain non-GAAP financial measures, in
Slide 40: Reconciliation of Non-GAAP Financial Measures to GAAP (Cont.)
40 Nasdaq: PRAA RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP (CONT.) ($ in millions)
Slide 41: Investor Relations Contact
41 Najim Mostamand, CFA VP, Investor Relations (757) 431-7913 IR@pragroup.com