PR Newswire | May 6, 2021 04:06PM EDT

05/06 15:05 CDT

PRA Group Reports First Quarter 2021 Results NORFOLK, Va., May 6, 2021

NORFOLK, Va., May 6, 2021 /PRNewswire/ -- PRA Group (Nasdaq: PRAA), a global leader in acquiring and collecting nonperforming loans, today reported its financial results for the first quarter of 2021. The Company reported net income attributable to PRA Group Inc. of $58.4 million in the first quarter, compared with $19.1 million in the prior year period. Diluted earnings per share were $1.27 versus $0.42 in the first quarter of 2020.

First Quarter Highlights (compared to the first quarter of 2020, unless otherwise indicated)

* Record total cash collections which increased 12% to $555.9 million. * Record total revenues which increased 15% to $289.5 million. * Income from operations increased 83% to $110.8 million. * Cash efficiency ratio1 of 68.0% during the quarter compared to 61.5% in the first quarter of 2020. * Net income attributable to PRA Group, Inc. increased 205% to $58.4 million. * Diluted earnings per share increased 202% to $1.27. * Debt to Adjusted EBITDA2 for the last 12 months decreased to 1.77x from 1.99x at December 31, 2020. * Total portfolio purchases of $159.0 million. * Estimated remaining collections (ERC) of $6.1 billion. * $1.2 billion available for portfolio purchases.

"PRA started 2021 with another record setting quarter. We collected record levels of cash globally and had record revenues. In Europe, solid portfolio purchases in 2020 drove record collections. In the U.S., we continued to see strong collections particularly in our call centers and digital platform. These results combined with increases in productivity helped to produce a near record cash efficiency ratio for the quarter," said Kevin Stevenson, president and chief executive officer. "Portfolio purchases during the quarter increased sequentially in the U.S. The market remains stable with little change in seller behavior; however, lower charge off rates are pushing forward flow volumes to the lower end of the contracted range. In Europe, we were pleased with our investment volume in what is normally a seasonally slower quarter. We have solid volumes of forward flows secured, believe the pipeline in Europe is larger than what 2020 offered, and were awarded our first portfolio, a forward flow, in Australia."

1. Calculated by dividing cash receipts less operating expense by cashreceipts.

2. A reconciliation of this non-GAAP financial measure to the most comparableGAAP measure can be found at the end of this press release.

Cash Collections and Revenues

* The following table presents cash collections by quarter and by source on an as reported and constant currency-adjusted basis:



Cash Collection Source 2021 2020

($ in thousands) Q1 Q4 Q3 Q2 Q1

Americas and Australia Core$347,638$286,524$336,322$343,269$305,780

Americas Insolvency 35,253 36,048 37,344 38,685 43,210

Europe Core 149,486 141,471 131,702 115,145 131,340

Europe Insolvency 23,510 17,830 13,971 12,841 14,243

Total Cash Collections $555,887$481,873$519,339$509,940$494,573







Cash Collection Source -

Constant Currency Adjusted 2021 2020

($ in thousands) Q1 Q1

Americas and Australia Core$347,638 $301,696

Americas Insolvency 35,253 43,239

Europe Core 149,486 142,004

Europe Insolvency 23,510 15,366

Total Cash Collections $555,887 $502,305

* Cash collections in the quarter increased $61.3 million compared to the first quarter of 2020. The increase was primarily due to a 32% increase in U.S. call center and other cash collections and a 19% increase in Europe cash collections. This increase was partially offset by a decrease in U.S. legal and Americas Insolvency cash collections. While cash collections decreased in Other Americas Core, this decrease was primarily driven by foreign exchange rates. * Portfolio income was $231.7 million compared to $262.0 million in the first quarter of 2020. This decrease was primarily driven by the Company's assumption that the significant cash overperformance in 2020 was largely acceleration versus an increase in total estimated collections, combined with recent purchases not offsetting runoff, primarily in Americas Insolvency and Other Americas. * Changes in expected recoveries were a net positive of $50.1 million. This amount reflects $103.0 million in recoveries received in excess of forecast from overperformance during the quarter, partially offset by a negative $52.9 million adjustment for changes in expected future recoveries. The Company has assumed that the majority of the current quarter overperformance is acceleration of future collections and made cash forecast adjustments deemed appropriate given the current environment.

Expenses

* Operating expenses in the quarter decreased $12.5 million compared to the first quarter of 2020. The decrease was primarily driven by a reduction in legal collection costs mainly as a result of a shift in collections from the legal channel to the call centers and digital platforms. This decrease was partially offset by an increase in agency fees primarily outside of the U.S. * Interest expense, net decreased $5.7 million compared to the first quarter of 2020 primarily due to the Company's early adoption of the new accounting for convertible debt as well as lower outstanding balances. * The effective tax rate for the first quarter of 2021 was 21.9%.

Portfolio Acquisitions

* The Company purchased $159.0 million in finance receivables in the first quarter of 2021. * At the end of the first quarter, the Company had in place forward flow commitments of up to $640.7 million with $452.7 million in the Americas and Australia and $188.0 million in Europe.



Portfolio Purchase Source 2021 2020

($ in thousands) Q1 Q4 Q3 Q2 Q1

Americas and Australia Core $88,912 $67,460 $84,139 $110,474$172,697

Americas Insolvency 9,486 12,504 14,328 14,527 20,772

Europe Core 44,095 137,647 74,930 34,247 60,990

Europe Insolvency 16,468 72,171 4,203 5,251 18,778

Total Portfolio Acquisitions$158,961$289,782$177,600$164,499$273,237



Conference Call InformationPRA Group, Inc. will hold a conference call today at 5:00 p.m. ET to discuss results with institutional investors and stock analysts. To listen to a webcast of the call and view the accompanying slides, visit https://ir.pragroup.com/events-and-presentations. To listen by phone, call 844-835-9982 in the U.S. or 412-317-5267 outside the U.S. and ask for the PRA Group conference call. To listen to a replay of the call, either visit the same website until May 6, 2022, or call 877-344-7529 in the U.S. or 412-317-0088 outside the U.S. and use access code 10155063 until May 13, 2021.

About PRA GroupAs a global leader in acquiring and collecting nonperforming loans, PRA Group, Inc. returns capital to banks and other creditors to help expand financial services for consumers in the Americas, Europe and Australia. With thousands of employees worldwide, PRA Group, Inc. companies collaborate with customers to help them resolve their debt. For more information, please visit www.pragroup.com.

About Forward Looking StatementsStatements made herein that are not historical in nature, including PRA Group, Inc.'s or its management's intentions, hopes, beliefs, expectations, representations, projections, plans or predictions of the future, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.

The forward-looking statements in this press release are based upon management's current beliefs, estimates, assumptions and expectations of PRA Group, Inc.'s future operations and financial and economic performance, taking into account currently available information. These statements are not statements of historical fact or guarantees of future performance, and there can be no assurance that anticipated events will transpire or that our expectations will prove to be correct. Forward-looking statements involve risks and uncertainties, some of which are not currently known to PRA Group, Inc. Actual events or results may differ materially from those expressed or implied in any such forward-looking statements as a result of various factors, including risk factors and other risks that are described from time to time in PRA Group, Inc.'s filings with the Securities and Exchange Commission, including PRA Group, Inc.'s annual reports on Form 10-K, its quarterly reports on Form 10-Q and its current reports on Form 8-K, which are available through PRA Group, Inc.'s website and contain a detailed discussion of PRA Group, Inc.'s business, including risks and uncertainties that may affect future results.

Due to such uncertainties and risks, you are cautioned not to place undue reliance on such forward-looking statements, which speak only as of today. Information in this press release may be superseded by more recent information or statements, which may be disclosed in later press releases, subsequent filings with the Securities and Exchange Commission or otherwise. Except as required by law, PRA Group, Inc. assumes no obligation to publicly update or revise its forward-looking statements contained herein to reflect any change in PRA Group, Inc.'s expectations with regard thereto or to reflect any change in events, conditions or circumstances on which any such forward-looking statements are based, in whole or in part.

PRA Group, Inc.

Unaudited Consolidated Income Statements

(Amounts in thousands, except per share amounts)



Three Months Ended March 31,

2021 2020

Revenues:

Portfolio income $231,672 $262,022

Changes in expected recoveries 50,136 (12,816)

Fee income 2,181 2,209

Other revenue 5,480 369

Total revenues 289,469 251,784

Operating expenses:

Compensation and employee services 73,984 75,171

Legal collection fees 12,926 14,572

Legal collection costs 21,312 34,447

Agency fees 15,591 13,376

Outside fees and services 20,760 19,394

Communication 12,663 13,511

Rent and occupancy 4,480 4,484

Depreciation and amortization 3,981 4,084

Other operating expenses 13,018 12,205

Total operating expenses 178,715 191,244

Income from operations 110,754 60,540

Other income and (expense):

Interest expense, net (31,552) (37,211)

Foreign exchange (loss)/gain (26) 2,283

Other 26 (76)

Income before income taxes 79,202 25,536

Income tax expense 17,322 3,100

Net income 61,880 22,436

Adjustment for net income attributable to noncontrolling interests3,474 3,301

Net income attributable to PRA Group, Inc. $58,406 $19,135

Net income per common share attributable to PRA Group, Inc.:

Basic $1.28 $0.42

Diluted $1.27 $0.42

Weighted average number of shares outstanding:

Basic 45,669 45,452

Diluted 46,045 45,784

PRA Group, Inc.

Consolidated Balance Sheets

(Amounts in thousands)



(unaudited)

March 31, 2021December 31, 2020

Assets

Cash and cash equivalents $92,798 $108,613

Restricted cash 16,057 12,434

Investments 54,682 55,759

Finance receivables, net 3,372,666 3,514,788

Other receivables, net 3,223 13,194

Income taxes receivable 27,246 21,928

Deferred tax assets, net 72,523 83,205

Right-of-use assets 50,839 52,951

Property and equipment, net 56,825 58,356

Goodwill 492,751 492,989

Other assets 38,920 38,844

Total assets $4,278,530 $4,453,061

Liabilities and Equity

Liabilities:

Accounts payable $4,817 $5,294

Accrued expenses 76,684 97,320

Income taxes payable 31,853 29,692

Deferred tax liabilities, net 39,739 40,867

Lease liabilities 55,322 57,348

Interest-bearing deposits 124,998 132,739

Borrowings 2,501,133 2,661,289

Other liabilities 40,755 54,986

Total liabilities 2,875,301 3,079,535

Equity:

Preferred stock, $0.01 par value, 2,000 shares authorized, no shares issued- - and outstanding

Common stock, $0.01 par value, 100,000 shares authorized, 45,799 shares issued and outstanding at March 31, 2021; 100,000 shares authorized, 45,585458 456 shares issued and outstanding at December 31, 2020

Additional paid-in capital 47,236 75,282

Retained earnings 1,582,384 1,511,970

Accumulated other comprehensive loss (253,576) (245,791)

Total stockholders' equity - PRA Group, Inc. 1,376,502 1,341,917

Noncontrolling interest 26,727 31,609

Total equity 1,403,229 1,373,526

Total liabilities and equity $4,278,530 $4,453,061

Select Expenses (Income) Amounts in thousands, pre-tax

Three Months Ended

March 31,December 31,September 30,June 30,March 31,December 31,September 30,June 30, 2021 2020 2020 2020 2020 2019 2019 2019

Acquisition/divestiture-- - - - - - - 227 related expenses

Legal costs not associated with normal - - - - - - - - operations

Noncash interest expense - amortization of debt - 1,959 2,388 3,247 3,217 3,157 3,128 3,071 discount

Noncash interest expense - amortization of debt 2,256 2,393 2,476 2,743 2,640 2,649 2,649 2,655 issuance costs

Change in fair value of 3,102 3,875 3,701 3,284 2,039 1,247 1,126 1,645 derivatives

Amortization of 181 1,792 360 351 349 407 400 418 intangibles

Stock-based 4,113 5,370 3,097 3,063 2,857 2,809 2,974 2,620 compensation expense

Purchase Price Multiples as of March 31, 2021 Amounts in thousands

Purchase Total Estimated Estimated Current EstimatedOriginal EstimatedPeriod Purchase Price ^(1)(2)Collections^ (3)Remaining Purchase Price Purchase Price Collections ^(4)Multiple Multiple ^(5)

Americas and Australia Core

1996-2010$1,078,219 $ 3,397,952 $ 24,585 315% 240%

2011 209,602 719,618 15,897 343% 245%

2012 254,076 652,293 18,061 257% 226%

2013 390,826 894,640 30,051 229% 211%

2014 404,117 859,775 45,345 213% 204%

2015 443,114 913,857 106,551 206% 205%

2016 455,767 1,098,295 207,608 241% 201%

2017 532,851 1,211,584 325,675 227% 193%

2018 653,975 1,368,879 447,682 209% 202%

2019 581,476 1,239,777 622,713 213% 206%

2020 435,668 931,493 717,342 214% 213%

2021 88,822 188,644 184,196 212% 212%

Subtotal 5,528,513 13,476,807 2,745,706

Americas Insolvency

1996-2010606,395 1,382,677 920 228% 180%

2011 180,432 370,183 493 205% 155%

2012 251,395 392,723 184 156% 136%

2013 227,834 354,943 651 156% 133%

2014 148,420 218,432 1,695 147% 124%

2015 63,170 87,087 876 138% 125%

2016 91,442 117,159 6,736 128% 123%

2017 275,257 349,209 51,318 127% 125%

2018 97,879 131,461 58,999 134% 127%

2019 123,077 158,692 105,361 129% 128%

2020 62,130 84,972 75,489 137% 136%

2021 9,486 13,185 13,168 139% 139%

Subtotal 2,136,917 3,660,723 315,890

Total Americas 7,665,430 17,137,530 3,061,596 and Australia

Europe Core

2012 20,409 41,543 - 204% 187%

2013 20,334 25,653 - 126% 119%

2014 773,811 2,240,653 586,113 290% 208%

2015 411,340 725,713 250,732 176% 160%

2016 333,090 562,194 285,405 169% 167%

2017 252,174 354,024 184,108 140% 144%

2018 341,775 529,154 346,370 155% 148%

2019 518,610 776,604 587,133 150% 152%

2020 324,119 557,506 491,301 172% 172%

2021 43,635 77,780 76,397 178% 178%

Subtotal 3,039,297 5,890,824 2,807,559

Europe Insolvency

2014 10,876 18,228 130 168% 129%

2015 18,973 29,018 1,997 153% 139%

2016 39,338 56,926 8,784 145% 130%

2017 39,235 49,255 17,707 126% 128%

2018 44,908 52,080 32,060 116% 123%

2019 77,218 101,866 72,242 132% 130%

2020 105,440 135,896 121,891 129% 129%

2021 16,621 20,786 20,151 125% 125%

Subtotal 352,609 464,055 274,962

Total 3,391,906 6,354,879 3,082,521 Europe

Total PRA$11,057,336 $ 23,492,409 $ 6,144,117 Group

(1) Includes the acquisition date finance receivables portfolios that were acquired through our business acquisitions.

For our non-U.S. amounts, purchase price is presented at the exchange rate at the end of the year in which the portfolio was purchased. In addition,(2) any purchase price adjustments that occur throughout the life of the portfolio are presented at the year-end exchange rate for the respective year of purchase.

(3) For our non-U.S. amounts, TEC is presented at the year-end exchange rate for the respective year of purchase.

(4) For our non-U.S. amounts, ERC is presented at the March 31, 2021 exchange rate.

(5) The Original Estimated Purchase Price Multiple represents the purchase price multiple at the end of the year of acquisition.

Portfolio Financial Information Year-to-date as of March 31, 2021 Amounts in thousands

Cash Change in ExpectedTotal PortfolioNet Finance Purchase Period Portfolio Income ^(1)Recoveries ^(1) Revenue^ (1)(2)Receivables as of Collections^ (1) March 31, 2021^ (3)

Americas and Australia Core

1996-2010 $ 3,726 $ 2,319 $ 447 $2,766 $5,178

2011 2,259 1,405 309 1,714 2,596

2012 2,786 1,286 375 1,661 5,638

2013 4,968 2,526 (351) 2,175 13,495

2014 6,937 3,494 (2,154) 1,340 19,677

2015 11,958 6,355 (4,961) 1,394 45,306

2016 24,893 11,990 3,908 15,898 84,015

2017 41,722 18,236 3,937 22,173 145,799

2018 75,462 25,404 10,591 35,995 245,467

2019 88,246 35,129 6,417 41,546 331,169

2020 80,231 35,446 16,613 52,059 369,418

2021 4,450 2,728 838 3,566 87,902

Subtotal 347,638 146,318 35,969 182,287 1,355,660

Americas Insolvency

1996-2010 181 186 (5) 181 -

2011 76 73 3 76 -

2012 190 72 120 192 -

2013 201 181 20 201 -

2014 298 355 (90) 265 190

2015 446 247 (202) 45 497

2016 2,727 491 241 732 5,429

2017 11,752 2,621 468 3,089 43,107

2018 7,812 1,778 751 2,529 50,368

2019 8,594 2,488 (1,786) 702 89,380

2020 2,960 1,897 535 2,432 57,174

2021 16 101 (14) 87 9,553

Subtotal 35,253 10,490 41 10,531 255,698

Total Americas and 382,891 156,808 36,010 192,818 1,611,358 Australia

Europe Core

2012 283 - 283 283 -

2013 171 - 171 171 -

2014 37,843 25,589 7,184 32,773 159,401

2015 13,464 7,427 (6,091) 1,336 130,541

2016 11,956 6,431 (649) 5,782 164,228

2017 9,565 3,191 (1,076) 2,115 127,233

2018 18,365 6,289 4,576 10,865 226,773

2019 32,020 10,111 2,450 12,561 390,892

2020 24,425 9,595 4,578 14,173 293,315

2021 1,394 210 1,015 1,225 43,431

Subtotal 149,486 68,843 12,441 81,284 1,535,814

Europe Insolvency

2014 88 48 6 54 55

2015 530 225 5 230 1,335

2016 1,762 546 118 664 6,487

2017 2,484 398 140 538 15,696

2018 2,967 640 (764) (124) 27,919

2019 6,222 1,554 183 1,737 59,244

2020 8,817 2,410 850 3,260 98,227

2021 640 200 1,147 1,347 16,531

Subtotal 23,510 6,021 1,685 7,706 225,494

Total Europe 172,996 74,864 14,126 88,990 1,761,308

Total PRA Group $ 555,887 $ 231,672 $ 50,136 $281,808 $3,372,666

(1) For our non-U.S. amounts, amounts are presented using the average exchange rates during the current reporting period.

(2) Total Portfolio Revenue refers to Portfolio Income and Changes in Expected Recoveries combined.

(3) For our non-U.S. amounts, Net Finance Receivables are presented at the March 31, 2021 exchange rate.

Cash Collections by Year, By Year of Purchase ^(1) as of March 31, 2021 Amounts in millions

Cash Collections

Purchase Period Purchase 1996- 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Total Price ^(2)(3)2010

Americas and Australia Core

1996-2010 $1,078.2 $1,990.5$367.1$311.5$228.4 $157.7 $109.3 $70.2 $46.0 $34.4 $28.4 $18.8 $3.7 $3,366.0

2011 209.6 - 62.0 174.5 152.9 108.5 73.8 48.7 32.0 21.6 16.6 10.9 2.3 703.8

2012 254.1 - - 56.9 173.6 146.2 97.3 60.0 40.0 27.8 17.9 11.8 2.8 634.3

2013 390.8 - - - 101.6 247.8 194.0 120.8 78.9 56.4 36.9 23.2 5.0 864.6

2014 404.1 - - - - 92.7 253.4 170.3 114.2 82.2 55.3 31.9 6.9 806.9

2015 443.1 - - - - - 117.0 228.4 185.9 126.6 83.6 57.2 12.0 810.7

2016 455.8 - - - - - - 138.7 256.5 194.6 140.6 105.9 24.9 861.2

2017 532.9 - - - - - - - 107.3 278.7 256.5 192.5 41.7 876.7

2018 654.0 - - - - - - - - 122.7 361.9 337.7 75.5 897.8

2019 581.5 - - - - - - - - - 143.8 349.0 88.2 581.0

2020 435.7 - - - - - - - - - - 133.0 80.2 213.2

2021 88.8 - - - - - - - - - - - 4.4 4.4

Subtotal 5,528.6 1,990.5 429.1 542.9 656.5 752.9 844.8 837.1 860.8 945.0 1,141.5 1,271.9 347.6 10,620.6

Americas Insolvency

1996-2010 606.4 390.9 261.2 270.4 231.0 158.9 51.2 8.6 4.6 2.5 1.4 0.8 0.2 1,381.7

2011 180.4 - 15.2 66.4 82.8 85.8 76.9 36.0 3.7 1.6 0.7 0.5 0.1 369.7

2012 251.4 - - 17.4 103.6 94.1 80.1 60.7 29.3 4.3 1.9 0.9 0.2 392.5

2013 227.8 - - - 52.5 82.6 81.7 63.4 47.8 21.9 2.9 1.3 0.2 354.3

2014 148.4 - - - - 37.0 50.9 44.3 37.4 28.8 15.8 2.2 0.3 216.7

2015 63.2 - - - - - 3.4 17.9 20.1 19.8 16.7 7.9 0.4 86.2

2016 91.4 - - - - - - 18.9 30.4 25.0 19.9 14.4 2.7 111.3

2017 275.3 - - - - - - - 49.1 97.3 80.9 58.8 11.8 297.9

2018 97.9 - - - - - - - - 6.7 27.4 30.5 7.8 72.4

2019 123.1 - - - - - - - - - 13.3 31.4 8.6 53.3

2020 62.1 - - - - - - - - - - 6.6 3.0 9.6

2021 9.5 - - - - - - - - - - - - -

Subtotal 2,136.9 390.9 276.4 354.2 469.9 458.4 344.2 249.8 222.4 207.9 180.9 155.3 35.3 3,345.6

Total Americas and Australia7,665.5 2,381.4 705.5 897.1 1,126.4 1,211.3 1,189.0 1,086.9 1,083.2 1,152.9 1,322.4 1,427.2 382.9 13,966.2

Europe Core

2012 20.4 - - 11.6 9.0 5.6 3.2 2.2 2.0 2.0 1.5 1.2 0.3 38.6

2013 20.3 - - - 7.1 8.5 2.3 1.3 1.2 1.3 0.9 0.7 0.2 23.5

2014 773.8 - - - - 153.2 292.0 246.4 220.8 206.3 172.9 149.8 37.8 1,479.2

2015 411.3 - - - - - 45.8 100.3 86.2 80.9 66.1 54.3 13.4 447.0

2016 333.1 - - - - - - 40.4 78.9 72.6 58.0 48.3 12.0 310.2

2017 252.2 - - - - - - - 17.9 56.0 44.1 36.1 9.6 163.7

2018 341.8 - - - - - - - - 24.3 88.7 71.2 18.4 202.6

2019 518.6 - - - - - - - - - 47.9 125.7 32.0 205.6

2020 324.1 - - - - - - - - - - 32.4 24.4 56.8

2021 43.6 - - - - - - - - - - - 1.4 1.4

Subtotal 3,039.2 - - 11.6 16.1 167.3 343.3 390.6 407.0 443.4 480.1 519.7 149.5 2,928.6

Europe Insolvency

2014 10.9 - - - - - 4.3 3.9 3.2 2.6 1.5 0.8 0.1 16.4

2015 19.0 - - - - - 3.0 4.4 5.0 4.8 3.9 2.9 0.5 24.5

2016 39.3 - - - - - - 6.2 12.7 12.9 10.7 7.9 1.8 52.2

2017 39.2 - - - - - - - 1.2 7.9 9.2 9.8 2.5 30.6

2018 44.9 - - - - - - - - 0.6 8.4 10.3 3.0 22.3

2019 77.2 - - - - - - - - - 5.1 21.1 6.2 32.4

2020 105.4 - - - - - - - - - - 6.1 8.8 14.9

2021 16.7 - - - - - - - - - - - 0.6 0.6

Subtotal 352.6 - - - - - 7.3 14.5 22.1 28.8 38.8 58.9 23.5 193.9

Total Europe 3,391.8 - - 11.6 16.1 167.3 350.6 405.1 429.1 472.2 518.9 578.6 173.0 3,122.5

Total PRA Group $11,057.3 $2,381.4$705.5$908.7$1,142.5$1,378.6$1,539.6$1,492.0$1,512.3$1,625.1$1,841.3$2,005.8$555.9$17,088.7

(1) For our non-U.S. amounts, cash collections are presented using the average exchange rates during the cash collection period.

(2) Includes the finance receivables portfolios that were acquired through our business acquisitions.

For our non-U.S. amounts, purchase price is presented at the exchange rate at the end of the year in which the portfolio was purchased. In addition,(3) any purchase price adjustments that occur throughout the life of the pool are presented at the year-end exchange rate for the respective year of purchase.

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, including Adjusted EBITDA, internally to evaluate the Company's performance and to set performance goals. Adjusted EBITDA is calculated as net income attributable to PRA Group, Inc. plus income tax expense; less foreign exchange gain (or plus foreign exchange loss); plus interest expense, net; plus other expense; plus depreciation and amortization; plus adjustment for net income attributable to noncontrolling interests; and plus recoveries applied to negative allowance less changes in expected recoveries. Adjusted EBITDA is a supplemental measure of performance that is not required by, or presented in accordance with, GAAP. PRA Group, Inc. presents Adjusted EBITDA because the Company considers it an important supplemental measure of operations and financial performance. Management believes Adjusted EBITDA helps provide enhanced period-to-period comparability of operations and financial performance and is useful to investors as other companies in the industry report similar financial measures. Adjusted EBITDA should not be considered as an alternative to net income determined in accordance with GAAP. Set forth below is a reconciliation of Adjusted EBITDA for the last twelve months (LTM) ended March 31, 2021 and for the year ended December 31, 2020, to net income, the most directly comparable financial measure calculated and reported in accordance with GAAP. The calculation of Adjusted EBITDA below may not be comparable to the calculation of similarly titled measures reported by other companies.

Reconciliation of Non-GAAP Financial Measures

LTM For the Year Ended

Adjusted EBITDA for PRA Group ($ in millions) March 31, 2021December 31, 2020

Net income attributable to PRA Group, Inc. $ 189 $ 149

Adjustments:

Income tax expense 55 41

Foreign exchange losses/(gains) - (2)

Interest expense, net 136 142

Other expense 1 1

Depreciation and amortization 18 18

Adjustment for net income attributable to noncontrolling interests 19 18

Recoveries applied to negative allowance less Changes in expected 997 968 recoveries

Adjusted EBITDA $ 1,416 $ 1,337

Additionally, The Company evaluates our business using certain ratios that use Adjusted EBITDA. Debt to Adjusted EBITDA is calculated by dividing borrowings by Adjusted EBITDA. The following table reflects our Debt to Adjusted EBITDA for LTM as of March 31, 2021 and for the year ended December 31, 2020 (amounts in millions):

Debt to Adjusted EBITDA

LTM For the Year Ended

March 31, 2021December 31, 2020

Borrowings $ 2,501 $ 2,661

LTM Adjusted EBITDA 1,416 1,337

Debt to LTM Adjusted EBITDA1.77 1.99

Investor Contact:Darby SchoenfeldVice President, Investor Relations(757) 431-7913Darby.Schoenfeld@PRAGroup.com

News Media Contact:Elizabeth KerseyVice President, Communications and Public Policy(757) 431-3398Elizabeth.Kersey@PRAGroup.com

View original content: http://www.prnewswire.com/news-releases/pra-group-reports-first-quarter-2021-results-301286071.html

SOURCE PRA Group