PRA Group Highlights Strong NPL Supply, Cost Cuts and $150M Buyback Plan

PRA Group Highlights Strong NPL Supply, Cost Cuts and $150M Buyback Plan

Strong portfolio supply and operating momentum: PRA Group reported $8.9 billion in estimated remaining collections, $297 million of portfolio purchases and $559 million of cash collections in the second quarter. Net leverage fell to 2.67 times after seven consecutive quarters of deleveraging.

Cost-cutting and technology investments: U.S. restructuring eliminated 215 corporate positions and 575 call-center roles, with expected annualized net savings of $35 million. The company is also expanding cloud-based customer-contact tools, digital channels and artificial intelligence capabilities.

Capital flexibility and shareholder returns: PRA Group had about $1 billion in liquidity, no debt maturities until 2028 and plans to remain disciplined on portfolio investments. After repurchasing $40 million of stock over the past 15 months, the board authorized a new $150 million share-buyback program.

PRA Group NASDAQ: PRAA outlined its strategy, operating trends and capital priorities during a company presentation, highlighting a favorable supply environment for non-performing loan portfolios, ongoing cost reductions and investments in technology. Chief Executive Officer Martin Sjolund said the company operates in the market for non-performing loans, purchasing charged-off consumer debt portfolios from banks and finance companies and seeking to collect more than it paid for them. PRA Group operates in 18 markets, with operations split roughly evenly between the United States and Europe.

Sjolund said banks can either collect delinquent accounts internally or sell portfolios to debt buyers. PRA uses data, analytics, collection operations and, when warranted, legal channels to pursue recoveries. The company works with customers on repayment arrangements that can include flexible plans and discounts, he said.

Portfolio, market and operating metrics The company reported estimated remaining collections, or ERC, of $8.9 billion, representing the cash it expects to collect from portfolios it already owns over coming years. Sjolund emphasized that ERC is not the face value of customer obligations, but rather the company’s estimate of future cash collections. During the second quarter, PRA Group purchased $297 million of portfolios, collected $559 million in cash and generated $58 million of net income, according to the presentation. Last-12-month adjusted EBITDA was $1.4 billion, while net leverage stood at 2.67 times. The company said it had completed seven consecutive quarters of deleveraging.

Sjolund described the U.S. non-performing loan market as the world’s largest, citing U.S. credit card balances of more than $1 trillion. He said charge-off rates had been relatively stable and had trended modestly lower. A weaker economy could increase delinquencies and the supply of portfolios available for purchase, although it could also affect collections on portfolios already owned. “The overall supply environment is at a pretty good level,” Sjolund said of both the U.S. and European markets. He characterized both markets as competitive, while noting that the U.S. regulatory framework creates barriers to entry because companies must navigate federal, state and, in some cases, city-level requirements.

PRA 3.0 strategy and restructuring actions The company’s PRA 3.0 strategy centers on disciplined capital deployment, operational and technology modernization, and people and culture. Sjolund said PRA Group is directing capital toward its highest-return opportunities while weighing collection costs, funding costs and the timing of cash flows. As part of its operating initiatives, the company has undertaken two major cost re...