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What changed in PRA GROUP INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of PRA GROUP INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+259 added−247 removedSource: 10-K (2024-02-29) vs 10-K (2023-02-28)

Top changes in PRA GROUP INC's 2023 10-K

259 paragraphs added · 247 removed · 175 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeWe believe that our competitive strengths include our disciplined and proprietary underwriting process, the extensive data set we have developed since our founding in 1996, our ability to bid on portfolios at appropriate prices, our capital position, our reputation from previous portfolio purchase transactions, our ability to close transactions in a timely fashion, our strong relationships with credit originators, our team of well-trained collectors who provide quality customer service while complying with applicable collection laws and our ability to efficiently and effectively collect on various asset types.
Biggest changeWe believe that our competitive strengths include our: • global presence, with portfolios in 18 countries; • strong relationships with credit originators; 6 • ability to close transactions in a timely fashion; • capital position; • extensive data set developed since our founding in 1996; • disciplined and proprietary underwriting process; • ability to bid on portfolios at appropriate prices; • compliance program; • reputation from previous portfolio purchase transactions; • quality customer service; and • ability to efficiently and effectively collect on various asset types.
In either case, typically, invited purchasers will have already successfully completed a qualification process that can include the seller's review of any or all of the following: the purchaser's experience, reputation, financial standing, operating procedures, business practices and compliance oversight.
Typically, invited purchasers, in either case, will have already successfully completed a qualification process that can include the seller's review of any or all of the following: the purchaser's experience, reputation, financial standing, operating procedures, business practices and compliance oversight.
We file claims or claim transfers securing our creditor rights in plans, and actively manage these accounts through the entire life cycle of the insolvency proceeding to ensure that we participate in any distributions to creditors.
We file claims or claim transfers securing our creditor rights in plans, and we actively manage these accounts through the entire life cycle of the insolvency proceeding to ensure that we participate in any distributions to creditors.
Foreign Corrupt Practices Act ("FCPA"), United Kingdom Bribery Act ("UK Bribery Act") and Similar Laws. Our operations outside the U.S. are subject to various U.S. and international laws and regulations, such as the FCPA and the UK Bribery Act, which prohibit corrupt payments to governmental officials and certain other individuals.
Foreign Corrupt Practices Act ("FCPA"), United Kingdom Bribery Act ("UK Bribery Act") and Similar Laws. Our operations outside the U.S. are subject to various U.S. and international laws and regulations, such as the FCPA and the UK Bribery Act, which prohibit certain payments to governmental officials and other individuals.
Significant laws and regulations applicable to our business include the following: • Fair Debt Collection Practices Act ("FDCPA"), which imposes certain obligations and restrictions on the practices of debt collectors, including specific restrictions regarding the time, place and manner of the communications. • Fair Credit Reporting Act ("FCRA"), which obligates credit information providers to verify the accuracy of information provided to credit reporting agencies and investigate consumer disputes concerning the accuracy of such information. • Gramm-Leach-Bliley Act ("GLBA"), which requires that certain financial institutions, including collection companies, develop policies to protect the privacy of consumers' private financial information and provide notices to consumers advising them of their privacy policies. • Electronic Funds Transfer Act, which regulates electronic fund transfer transactions, including a consumer’s right to stop payments on a pre-approved fund transfer and right to receive certain documentation of the transaction. • Telephone Consumer Protection Act ("TCPA"), which, along with similar state laws, places certain restrictions on users of certain automated dialing equipment and pre-recorded messages that place telephone calls to consumers. • Servicemembers Civil Relief Act ("SCRA"), which gives U.S. military service personnel relief from credit obligations they may have incurred prior to entering military service and may also apply in certain circumstances to obligations and liabilities incurred by a servicemember while serving on active duty. • Health Insurance Portability and Accountability Act, which provides standards to protect the confidentiality of patients' personal healthcare and financial information in the U.S. • U.S.
Significant laws and regulations applicable to our business include the following: • Fair Debt Collection Practices Act ("FDCPA"), which imposes certain obligations and restrictions on the practices of debt collectors, including specific restrictions regarding the time, place and manner of the communications. • Fair Credit Reporting Act ("FCRA"), which obligates credit information providers to verify the accuracy of information provided to credit reporting agencies and investigate consumer disputes concerning the accuracy of such information. • Gramm-Leach-Bliley Act ("GLBA"), which requires that certain financial institutions, including collection companies, develop policies to protect the privacy of consumers' private financial information and provide notices to consumers advising them of their privacy policies. • Electronic Funds Transfer Act, which regulates electronic fund transfer transactions, including a consumer’s right to stop payments on a pre-approved fund transfer and right to receive certain documentation of the transaction. • Telephone Consumer Protection Act ("TCPA"), which, along with similar state laws, places certain restrictions on users of certain automated dialing equipment and pre-recorded messages that place telephone calls to consumers. • Servicemembers Civil Relief Act ("SCRA"), which gives U.S. military service personnel relief from credit obligations they may have incurred prior to entering military service and may also apply in certain circumstances to obligations and liabilities incurred by a servicemember while serving on active duty. • Health Insurance Portability and Accountability Act ("HIPAA"), which provides standards to protect the confidentiality of patients' personal healthcare and financial information in the U.S. • U.S.
Bankruptcy Code, which prohibits certain contacts with consumers after the filing of bankruptcy petitions and dictates what types of claims will or will not be allowed in a bankruptcy proceeding including how such claims may be discharged. • Americans with Disabilities Act, which requires that telecommunications companies operating in the U.S. take steps to ensure functionally equivalent services are available for their consumers with disabilities, and requires accommodation of consumers with disabilities, such as the implementation of telecommunications relay services. 7 • U.S.
Bankruptcy Code, which prohibits certain contacts with consumers after the filing of bankruptcy petitions and dictates what types of claims will or will not be allowed in a bankruptcy proceeding including how such claims may be discharged. • Americans with Disabilities Act, which requires that telecommunications companies operating in the U.S. take steps to ensure functionally equivalent services are available for their consumers with disabilities, and requires accommodation of consumers with disabilities, such as the implementation of telecommunications relay services. • U.S.
Although similar to the FCPA, the UK Bribery Act is broader in scope and covers bribes given to or received by any person with improper intent. • Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"), which restructured the regulation and supervision of the financial services industry in the U.S. and created the CFPB.
Although similar to the FCPA, the UK Bribery Act is broader in scope and covers bribes given to or received by any person with improper intent. 7 • Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"), which restructured the regulation and supervision of the financial services industry in the U.S. and created the CFPB.
Our failure to comply with these laws could result in enforcement action against us, the payment of significant fines and penalties, restrictions upon our operations or our inability to recover amounts owed to us.
Our failure to comply with these laws could result in an enforcement action against us, the payment of significant fines and penalties, restrictions upon our operations or our inability to recover amounts owed to us.
These accounts fall under insolvency plans ranging from Individual Voluntary Arrangements ("IVAs") and Trust Deeds in the United Kingdom ("UK"), to Consumer Proposals in Canada, to various forms of bankruptcy plans in the U.S., Canada, Germany and the UK.
These accounts fall under insolvency plans ranging from Individual Voluntary Arrangements ("IVAs") and Trust Deeds in the UK, to Consumer Proposals in Canada, to various forms of bankruptcy plans in the U.S., Canada, Germany and the UK.
Our compliance management system and related controls that are embedded in business processes are also tested regularly by our compliance and internal audit departments to foster compliance with laws, regulations and internal policy.
Our compliance management system and related controls, which are embedded in our business processes, are also tested regularly by our compliance and internal audit departments to foster compliance with laws, regulations and internal policy.
Legal Recovery - Core Portfolios An important component of our collections effort involves our legal recovery operations and the judicial collection of balances from customers who, in general, we believe have the ability, but not the willingness, to resolve their obligations.
Legal Recovery - Core Portfolios An important component of our collection efforts involves our legal recovery operations and the judicial collection of balances from customers who, in general, we believe have the ability, but not the willingness, to resolve their obligations.
These accounts are filed under the relevant country's insolvency or bankruptcy codes and may have an associated payment plan that generally ranges from three to seven years in duration. Accounts which are purchased while insolvent can be purchased at any stage in the insolvency or bankruptcy plan life cycle.
These accounts are managed under the relevant country's insolvency or bankruptcy codes and may have an associated payment plan that generally ranges from three to seven years. Accounts that are purchased while insolvent can be purchased at any stage in the insolvency or bankruptcy plan life cycle.
Item 1. Business. General PRA Group Inc. is a global financial and business services company with operations in the Americas, Europe and Australia. Our primary business is the purchase, collection and management of portfolios of nonperforming loans.
Item 1. Business. General PRA Group Inc. is a global financial and business services company with operations based primarily in the Americas and Europe, and to a lesser extent, Australia. Our primary business is the purchase, collection and management of portfolios of nonperforming loans.
O ur employees share a common set of values and commitments that define how we treat each other, how we relate to our customers and the responsibilities we have to shareholders, regulators, clients and others. We refer to this shared set of values as C.A.R.E.S, which stands for Committed, Accountable, Respectful, Ethical and Successful.
Our employees share a common set of values and commitments that define how we treat each other, how we relate to our customers and the responsibilities we have to shareholders, regulators, clients and others. We refer to this shared set of values as CARES, which stands for Committed, Accountable, Respectful, Ethical and Successful.
Fee-Based Services In addition to the purchase, collection and management of portfolios of nonperforming loans, we provide fee-based services including class action claims recovery purchasing and servicing through our subsidiary, Claims Compensation Bureau, LLC ("CCB"), and third-party servicing of bankruptcy accounts in the U.S.
Fee-Based Services In addition to the purchase, collection and management of portfolios of nonperforming loans, we provide fee-based services including class action claims recovery purchasing and servicing through our subsidiary, Claims Compensation Bureau, LLC ("CCB").
The Dodd-Frank Act, along with the Unfair, Deceptive, or Abusive Acts or Practices ("UDAAP") provisions included therein, and the Federal Trade Commission Act, prohibit unfair, deceptive, and/or abusive acts and practices. • International data protection and privacy laws, which include relevant country specific legislation in the UK and other European countries where we operate that regulate the processing of information relating to individuals, including the obtaining, holding, use or disclosure of such information; the Personal Information Protection and Electronic Documents Act, which aims to protect personal information that is collected, used or disclosed in certain circumstances for purposes of electronic commerce in Canada; and the GDPR, which regulates the processing and free movement of personal data within the European Union ("EU") and transfer of such data outside the EU. • Consumer Credit Act 1974 (and its related regulations), Unfair Terms in Consumer Contracts Regulations of 1999 and the Financial Conduct Authority's consumer credit conduct of business rules , which apply to our UK operations and govern consumer credit agreements.
The Dodd-Frank Act, along with the Unfair, Deceptive, or Abusive Acts or Practices ("UDAAP") provisions included therein, and the Federal Trade Commission Act, prohibit unfair, deceptive, and/or abusive acts and practices. • International data protection and privacy laws, which include relevant country specific legislation in the UK and other European countries where we operate that regulate the processing of information relating to individuals, including the obtaining, holding, use or disclosure of such information; the Personal Information Protection and Electronic Documents Act, which aims to protect personal information that is collected, used or disclosed in certain circumstances for purposes of electronic commerce in Canada; and the GDPR, which regulates the processing and free movement of personal data within the European Union ("EU") and transfer of such data outside the EU. • Consumer Credit Act 1974 (and its related regulations); Unfair Terms in Consumer Contracts Regulations of 1999; and the Financial Conduct Authority's: – consumer credit conduct of business rules , which apply to our UK operations and govern consumer credit agreements; – Consumer Duty, which sets higher and clearer standards of consumer protection across financial services; and – Senior Managers and Certification Regime ("SM&RC"), which aims to reduce harm to consumers and strengthen market integrity.
There are some markets in which the collection process follows a prescribed, time-sensitive and sequential set of legal actions, but in the majority of instances, we use models and analysis to select those accounts reflecting a high propensity to pay in a legal environment.
There are some markets, especially the Nordic countries, in which the collection process follows a prescribed, time-sensitive and sequential set of legal actions, but in the majority of instances, we use models and analysis to select those accounts reflecting a higher propensity to pay within a given legal environment.
Our Insolvency operation consists primarily of purchasing and collecting on nonperforming loan accounts where the customer is involved in a bankruptcy proceeding or the equivalent in some European countries. We also provide fee-based services on class action claims recoveries and by servicing consumer bankruptcy accounts in the United States ("U.S.").
Our Insolvency operation consists primarily of purchasing and collecting on nonperforming loans where the customer is involved in a bankruptcy proceeding, or the equivalent thereof, in certain European countries. We also provide fee-based services on class action claims recoveries in the United States ("U.S.").
We use a combination of internal staff (attorney and support) and external staff to pursue legal collections under certain circumstances, as we deem appropriate. Insolvency Operations Accounts that are in an insolvent or bankrupt status are managed by our Insolvency operations team.
We use a combination of internal staff (attorneys and support), as well as external law firms and other third-party vendors, to pursue legal collections under certain circumstances, as we deem appropriate. Insolvency Operations Accounts that are in an insolvent or bankrupt status are managed by our Insolvency operations team.
Government Regulation We are subject to a variety of federal, state, local and international laws that establish specific guidelines and procedures that debt collectors must follow when collecting customer accounts, including laws relating to the collection, use, retention, security and transfer of personal information.
Government Regulation We are subject to a variety of federal, state, local and international laws that establish specific guidelines and procedures that debt collectors must follow when collecting on customer accounts, including laws relating to the collection, use, retention, security and transfer of personal information. It is our policy to comply with applicable laws in all of our activities.
In addition, certain of our EU subsidiaries are subject to capital adequacy, liquidity and other requirements imposed by regulators, such as the Swedish Financial Supervisory Authority. Human Capital As of December 31, 2022, we employed 3,277 full-time equivalents globally across 18 countries, with approximately 73% of our workforce distributed across the Americas and Australia and 27% in Europe.
In addition, certain of our EU subsidiaries are subject to capital adequacy, liquidity and other requirements imposed by regulators, such as the Swedish Financial Supervisory Authority. Human Capital As of December 31, 2023, we employed 3,155 full-time equivalents globally, with approximately 72% of our workforce located in the Americas and Australia and 28% in Europe.
The analysis driving those decisions relies on models and variables that have the highest correlation to profitable collections from call activity.
The analysis driving those decisions relies on models and variables that we believe will result in the highest correlation to profitable collections from call activity.
Under a forward flow contract, we agree to purchase statistically similar nonperforming loan portfolios from credit originators on a periodic basis, at a negotiated price over a specified time period, typically from three to 12 months. 5 Nonperforming Loan Portfolio Collection Operations Call Center Operations In higher volume markets, our collection efforts leverage internally staffed call centers.
Under a forward flow agreement, we purchase statistically similar nonperforming loan portfolios from a credit originator on a periodic basis, at a negotiated price over a specified term, typically ranging from three to 12 months. Portfolio Collection Operations Call Center Operations In higher volume markets, our collection efforts have been driven by internally staffed call centers.
Portfolios sold close to the filing of the insolvency or bankruptcy plan may take months to generate cash flow; however, aged portfolios sold years after the filing of the insolvency or bankruptcy plan will typically generate cash flows immediately. Digital As a complement to our collection operations, we have developed digital capabilities to support our collection efforts.
Portfolios sold close to the filing of the insolvency or bankruptcy plan may take months to generate cash flow; however, aged portfolios sold years after the filing of the insolvency or bankruptcy plan will typically generate cash flows immediately.
Our Core operation specializes in purchasing and collecting nonperforming loans, which we purchased since either the credit originators and/or other third-party collection agencies have been unsuccessful in collecting the full balance owed.
Our Core operation specializes in purchasing and collecting nonperforming loans, which we purchase since the credit originators have chosen not to pursue, or have been unsuccessful in, collecting the full balance owed.
The accounts we manage are derived from two sources: (1) our purchased portfolios of insolvent nonperforming loans and (2) our Core purchased portfolios of nonperforming loans where our customers filed for protection under the insolvency or bankruptcy laws after being purchased by us. We purchase these types of accounts in the U.S., Canada, Germany and the UK.
The accounts we manage are derived from two sources: (1) our purchased portfolios of insolvent nonperforming loans and (2) our Core purchased portfolios of nonperforming loans where our customers file for protection under insolvency or bankruptcy laws after we have purchased the account.
It is our policy to comply with applicable federal, state, local and international laws in all our activities. To promote compliance with applicable laws and regulations, we provide extensive training upon hire and additional training at least annually. We also continuously monitor and evaluate our collectors in order to provide meaningful and prompt feedback.
To promote compliance with applicable laws and regulations, we provide extensive training upon hire and additional training at least annually. We also monitor and evaluate our collectors and third-party service providers in order to provide meaningful and prompt feedback.
In an auction process, the seller will assemble a portfolio of nonperforming loans and will seek purchase prices from specifically invited bidders. In a privately negotiated sale process, the credit originator will contact one or more purchasers directly, receive a bid and negotiate the terms of sale.
In a privately negotiated sale process, the credit originator will contact one or more purchasers directly, receive a bid and negotiate the terms of sale.
The price at which we purchase portfolios depends on the age of the portfolio, whether it is a Core or Insolvency portfolio, geographic region, the seller's selection criteria, our historical experience with a certain asset type or credit originator and other similar factors. We purchase portfolios of nonperforming loans from credit originators through auctions and negotiated sales.
The price at which we purchase portfolios depends on a number of factors, including the age since charge-off of the portfolio, whether it is a Core or Insolvency portfolio, geographic region, the seller's selection criteria, our historical collections experience with a certain asset type or credit originator, our estimated cost to collect on the portfolio, our financing costs and the current market environment.
In some newer markets or in markets that have less consistent debt purchasing patterns, most notably outside the U.S., we may utilize external vendors to do some or all of this work. Whether the accounts are being worked internally or externally, we utilize our proprietary analysis to proportionally direct work efforts to those customers most likely to pay.
In some newer markets, and in markets that have less consistent debt purchasing patterns, most notably outside the U.S., we also utilize external vendors to support some or all of our collection efforts.
In support of these values we offer comprehensive total rewards programs, which include competitive pay and bonus structures, health and wellness benefits, retirement plans and an employee assistance program.
These values are intended to foster a high-performing workforce and sense of belonging by working together to build an equitable and inclusive culture where employees can reach their full potential. In support of these values, we offer comprehensive total rewards programs, which include competitive pay and bonus structures, health and wellness benefits, retirement plans and an employee assistance program.
Seasonality Customer payment patterns in all of the countries in which we operate can be affected by seasonal employment trends, income tax refunds, and holiday spending habits.
Seasonality Customer payment patterns in all of the countries in which we operate can be affected by, among other factors, seasonal employment trends, income tax refunds and holiday spending habits. Competition Competition is derived from both third-party contingent fee collection agencies and purchasers of debt that either manage their own nonperforming loans or outsource such servicing.
Nonperforming Loan Portfolio Acquisitions To identify purchasing opportunities, we maintain an extensive marketing effort with our senior officers contacting known and prospective sellers of nonperforming loans.
Portfolio Acquisitions To identify purchasing opportunities, we maintain an extensive marketing effort with our global investment team contacting known and prospective sellers of nonperforming loans. From these sellers, we acquire a variety of nonperforming loans, including Visa ® and Mastercard ® general purpose credit card accounts, private label credit card accounts, personal loans, automobile loans and small business loans.
Regulatory complexity and burdens, combined with seller preference for experienced portfolio purchasers, create barriers to successful entry for new competitors particularly in the U.S. While both remain competitive, the contingent fee industry is more fragmented than the purchased portfolio industry. We compete in purchasing of nonperforming loans on the basis of price, reputation, industry experience and performance.
In the U.S., regulatory complexity and burdens, combined with seller preference for experienced portfolio purchasers, create barriers to successful entry for new competitors. In Brazil, there are a small number of major purchasers of nonperforming loans, whose experience and access to capital also create barriers to successful entry for new competitors.
Depending on the characteristics of the account and the applicable local collection laws, we determine whether to commence legal action to judicially collect on the account. The legal process can take an extended period of time and can be costly, but when accounts are selected properly, it usually generates net cash collections that likely would not have been realized otherwise.
The legal process can take an extended period of time and requires an upfront investment in court filing costs, but usually generates net cash collections that likely would not have been realized otherwise.
We have developed these platforms in all of our operating markets that provide for inbound collections, as well as outbound collections where the regulatory environment allows us to operate in such a manner. In an effort to meet our customers in the channel which they prefer, we have developed digital capabilities to support our collection efforts.
Digital As a complement to our collection operations, and in-line with macro trends demonstrating an increasingly digital consumer, we continue to implement digital platforms to support our collection efforts in all of our operating markets. These platforms provide for inbound collections, as well as outbound collections where permitted by local regulations.
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As part of our strategic plans, we have expanded through various acquisitions and organic growth. In 2014, we acquired Aktiv Kapital AS, a Norway-based company specializing in the purchase, collection and management of portfolios of nonperforming loans throughout Europe and Canada. In 2015, we expanded into South America by acquiring 55% of the equity interest in RCB Investimentos S.A.
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We purchase portfolios of nonperforming loans from credit originators through auctions and negotiated sales. In an auction process, the seller will assemble a portfolio of nonperforming loans and will request purchase prices from specifically invited bidders.
Removed
("RCB"), a servicing platform for nonperforming loans and established a business that purchases nonperforming loans in Brazil. Our subsequent sale of 79% of our interest in RCB to Banco Bradesco S.A., completed in 2019, had no impact on the nonperforming loan purchasing business we established.
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As part of more recent efforts to enhance the performance of our U.S. business, we have expanded the outsourcing of collection efforts while also testing and piloting the offshoring of collections. Over time, we expect these initiatives will complement our internal resources and U.S. call centers.
Removed
RCB continues to service and/or manage our Brazilian portfolios, of which, the fees are included within Agency fees in our Consolidated Income Statements. In 2016, we acquired DTP S.A., a Polish-based debt collection company, furthering our in-house collection efforts in Poland. In 2021, we began purchasing nonperforming loans in Australia, leveraging an entity we established in 2011.
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Whether the accounts are being serviced by internal staff or external vendors, except for accounts placed with a third-party debt collection agency, we utilize our proprietary analysis to proportionally direct work efforts to those customers most able and willing to pay.
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We have one reportable segment based on similarities among the operating segments, including economic characteristics, the nature of the products and services, the nature of the production processes, the types or classes of customers for our products and services, the methods used to distribute our products and services and the nature of the regulatory environment.
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Depending on the characteristics of the account and the applicable 5 local collection laws, we determine whether to commence legal action to judicially collect on the account. In certain countries, the legal collection process has a lower cost.
Removed
From these sellers, we have acquired a variety of nonperforming loans including Visa ® and MasterCard ® credit cards, private label and other credit cards, installment loans, lines of credit, deficiency balances of various types, legal judgments and trade payables.
Added
Our digital channels allow us to service our customers in a channel many of them prefer, providing convenient, user-friendly platforms for making payments, accessing account information, viewing documents and contacting an account representative. Equity Method Investment We have an 11.7% equity interest in RCB Investimentos S.A.
Removed
We have developed inbound collections capabilities in all of our operating markets, as well as outbound collections where the regulatory environment allows. Equity Investments We have an 11.7% equity interest in RCB, a servicer of nonperforming loans in Brazil.
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("RCB"), a portfolio servicer and manager that performs the underwriting and collections activities related to our Brazilian portfolios. Fees paid to RCB are included within Agency fees in our Consolidated Income Statements.
Removed
Typically, cash collections in the Americas tend to be higher in the first half 6 of the year due to the high volume of income tax refunds received by individuals in the U.S., and trend lower as the year progresses. In the first half of 2022, this spike was not as pronounced.
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In Europe, the diverse regulatory environment across different markets creates varying levels of competition, with some markets being more competitive than others. We compete in the purchasing of nonperforming loans on the basis of price, reputation, industry experience and performance.
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Additionally, 2021 and 2020 deviated from usual seasonal patterns due to the impact of the COVID-19 pandemic. Competition Competition is derived from both third-party contingent fee collection agencies and purchasers of debt that manage their own nonperforming loans or outsource such servicing.
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These values are intended to foster a high performing workforce and sense of belonging by working together to build an equitable and inclusive culture where employees can be themselves, to be their best.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe availability of nonperforming loan portfolios at prices that generate an appropriate return on our investment depends on a number of factors, including the following: • the continuation of high levels of consumer debt obligations; 9 • sales of nonperforming loan portfolios by credit originators; and • competitive factors affecting potential purchasers and credit originators of nonperforming loans.
Biggest changeThe availability of nonperforming loan portfolios at prices that generate an appropriate return on our investment depends on a number of factors, including the following: • consumer debt levels; • sales of nonperforming loan portfolios by credit originators; and • competitive factors affecting potential purchasers and credit originators of nonperforming loans. 9 Furthermore, heightened regulation of the credit card and consumer lending industry, or changing credit origination strategies, may result in decreased availability of credit to consumers, potentially leading to a future reduction in nonperforming loans available for purchase from credit originators.
These and other economic factors could have an adverse effect on our financial condition and results of operations. We may not be able to continually replace our nonperforming loans with additional portfolios sufficient to operate efficiently and profitably, and/or we may not be able to purchase nonperforming loans at appropriate prices.
These and other economic factors could have an adverse effect on our financial condition and results of operations. We may not be able to continually replace our nonperforming loans with additional portfolios sufficient to operate efficiently and profitably, or we may not be able to purchase nonperforming loans at appropriate prices.
Our industry is also at times investigated by regulators and offices of state 12 attorneys general, and subpoenas and other requests or demands for information may be issued by governmental authorities who are investigating debt collection activities. These investigations may result in enforcement actions, fines and penalties, or the assertion of private claims and lawsuits.
Our industry is also at times investigated by regulators and offices of state attorneys general, and subpoenas and other requests or demands for information may be issued by governmental authorities who are investigating debt collection activities. These investigations may result in enforcement actions, fines and penalties, or the assertion of private claims and lawsuits.
Any such breach or other incident also could result in the personal data or other confidential or proprietary information stored on our systems and networks, or our vendors’ systems and networks, being improperly accessed, acquired or modified, publicly disclosed, lost, or stolen, which could subject us to liability to our customers, vendors, business partners and others.
Any such breach or other 16 incident also could result in the personal data or other confidential or proprietary information stored on our systems and networks, or our vendors’ systems and networks, being improperly accessed, acquired or modified, publicly disclosed, lost, or stolen, which could subject us to liability to our customers, vendors, business partners and others.
Our insurance policies may be insufficient to insure us against such risks, and future escalations in premiums and deductibles under these policies may render them uneconomical. Changes in tax provisions or exposures to additional tax liabilities could have an adverse tax effect on our financial condition.
Our insurance policies may 14 be insufficient to insure us against such risks, and future escalations in premiums and deductibles under these policies may render them uneconomical. Changes in tax provisions or exposures to additional tax liabilities could have an adverse effect on our financial condition.
Operational and Industry Risks A deterioration in the economic or inflationary environment in the countries in which we operate could have an adverse effect on our business and results of operations. Our performance may be adversely affected by economic, political or inflationary conditions in any market in which we operate.
Operational and Industry Risks A deterioration in the economic or inflationary environment in the countries in which we operate could have an adverse effect on our business and results of operations. Our performance may be adversely affected by economic or inflationary conditions in any market in which we operate.
Violations of these laws and regulations by us, any of our employees or our third-party vendors, either inadvertently or intentionally, could result in fines and penalties, criminal sanctions, restrictions on our operations and ability to offer our products and services in one or more countries.
Violations of these laws and regulations by us, any of our employees or our third-party vendors, either inadvertently or intentionally, could result in fines and penalties, criminal sanctions, restrictions on our operations and ability to offer our services in one or more countries.
The global nature of our operations expands the risks and uncertainties described elsewhere in this section, including the following: • changes in local political, economic, social and labor conditions in the markets in which we operate; • foreign exchange controls on currency conversion and the transfer of funds that might prevent us from repatriating cash earned in countries outside the U.S. in a tax-efficient manner; • currency exchange rate fluctuations, currency restructurings, inflation or deflation and our ability to manage these fluctuations through a foreign exchange risk management program; • different employee/employer relationships, laws and regulations, union recognition and the existence of employment tribunals and works councils; • laws and regulations imposed by international governments, including those governing data security, sharing and transfer; • potentially adverse tax consequences resulting from changes in tax laws in the jurisdictions in which we operate or challenges to our interpretations and application of complex international tax laws; • logistical, communications and other challenges caused by distance and cultural and language differences, each making it harder to do business in certain jurisdictions; • volatility of global credit markets and the availability of consumer credit and financing in our international markets; • uncertainty as to the enforceability of contract rights under local laws; • the potential of forced nationalization of certain industries, or the impact on creditors' rights, consumer disposable income levels, flexibility and availability of consumer credit and the ability to enforce and collect aged or charged-off 11 debts stemming from international governmental actions, whether through austerity or stimulus measures or initiatives, intended to control or influence macroeconomic factors such as wages, unemployment, national output or consumption, inflation, investment, credit, finance, taxation or other economic drivers; • the presence of varying levels of business corruption in international markets and the effect of various anti-corruption and other laws on our international operations; • the impact on our day-to-day operations and our ability to staff our international operations given our changing labor conditions and long-term trends towards higher wages in developed and emerging international markets as well as the potential impact of union organizing efforts; • potential damage to our reputation due to non-compliance with international and local laws; and • the complexity and necessity of using non-U.S. representatives, consultants and other third-party vendors.
The global nature of our operations expands the risks and uncertainties described elsewhere in this section, including the following: • changes in local political, economic, social and labor conditions in the markets in which we operate; • foreign exchange controls on currency conversion and the transfer of funds that might prevent us from repatriating cash earned in countries outside the U.S. in a tax-efficient manner; • currency exchange rate fluctuations, currency restructurings, inflation or deflation and our ability to manage these fluctuations through a foreign exchange risk management program; • different employee/employer relationships, laws and regulations, union recognition and the existence of employment tribunals and works councils; • laws and regulations imposed by international governments, including those governing data security, sharing and transfer; • potentially adverse tax consequences resulting from changes in tax laws in the jurisdictions in which we operate or challenges to our interpretations and application of complex international tax laws; • logistical, communications and other challenges caused by distance and cultural and language differences, each making it harder to do business in certain jurisdictions; • volatility of global credit markets and the availability of consumer credit and financing in our international markets; • uncertainty as to the enforceability of contract rights under local laws; • the potential of forced nationalization of certain industries, or the impact on creditors' rights, consumer disposable income levels, flexibility and availability of consumer credit and the ability to enforce and collect aged or charged-off debts stemming from international governmental actions, whether through austerity or stimulus measures or initiatives, intended to control or influence macroeconomic factors such as wages, unemployment, national output or consumption, inflation, investment, credit, finance, taxation or other economic drivers; • the presence of varying levels of business corruption in international markets and the effect of various anti-corruption and other laws on our international operations; • the impact on our day-to-day operations and our ability to staff our international operations given long-term trends towards higher wages in developed and emerging international markets as well as the potential impact of union organizing efforts; • the potential for a widening military conflict in Europe; • potential damage to our reputation due to non-compliance with international and local laws; and • the complexity and necessity of using non-U.S. representatives, consultants and other third-party vendors.
Many of these systems contain sensitive and confidential information, including personal data, 15 our trade secrets and proprietary business information, and information and materials owned by or pertaining to our business customers, vendors and business partners.
Many of these systems contain sensitive and confidential information, including personal data, our trade secrets and proprietary business information, and information and materials owned by or pertaining to our customers, vendors and business partners.
We have recorded a significant amount of goodwill as a result of our business acquisitions. Goodwill is not amortized, but is tested for impairment at the reporting unit level.
We have recorded a significant amount of goodwill as a result of our business acquisitions. Goodwill is not amortized, but rather, is tested for impairment at the reporting unit level.
Such legal requirements and government actions also may impede our development of new products, services, or businesses, make existing products, services, or businesses unprofitable, increase our operating costs, require substantial management resources, result in adverse publicity and subject us to remedies that harm our business or profitability, including penalties or orders that we change or terminate current business practices.
Such legal requirements and government actions also may impede our development of new services or businesses, make existing services or businesses unprofitable, increase our operating costs, require substantial management resources, result in adverse publicity and subject us to remedies that harm our business or profitability, including penalties or orders that may change or terminate current business practices.
The Organization for Economic Co-operation and Development ("OECD") recently issued Pillar Two model rules with the aim of ensuring that multinational enterprises pay a 15% effective tax rate in each jurisdiction. The EU adopted the OECD Pillar Two Directive with a beginning date of January 1, 2024.
The Organization for Economic Co-operation and Development ("OECD") recently issued Pillar Two model rules with the aim of ensuring that multinational enterprises pay a 15% effective tax rate in each jurisdiction. The EU adopted the OECD Pillar Two Directive effective January 1, 2024.
Incurring a substantial amount of debt could have important consequences for our business, including: • making it more difficult for us to satisfy our obligations with respect to our debt or to our trade or other creditors; • increasing our vulnerability to adverse economic or industry conditions; • limiting our ability to obtain additional financing to fund capital expenditures and acquisitions, particularly when the availability of financing in the capital markets is constrained; 14 • requiring a substantial portion of our cash flows from operations and reducing our ability to use our cash flows to fund working capital, capital expenditures, acquisitions and general corporate requirements; • increasing the amount of interest expense because most of the indebtedness under our credit facilities bear interest at floating rates, which, if interest rates increase, will result in higher interest expense; • limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; and • placing us at a competitive disadvantage to less leveraged competitors.
Incurring a substantial amount of debt could have important consequences for our business, including: • making it more difficult for us to satisfy our obligations with respect to our debt or to our trade or other creditors; • increasing our vulnerability to adverse economic or industry conditions; • limiting our ability to obtain additional financing to fund capital expenditures and acquisitions, particularly when the availability of financing in the capital markets is constrained; • requiring a substantial portion of our cash flows from operations and reducing our ability to use our cash flows to fund working capital, capital expenditures, acquisitions and general corporate requirements; • increasing the amount of interest expense because the indebtedness under our credit facilities bears interest at floating rates, which, if interest rates increase, will result in higher interest expense; • limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; and • placing us at a competitive disadvantage compared to less leveraged competitors.
In addition, laws and regulations relating to privacy, cybersecurity and data protection are quickly evolving, and any such proposed or new legal frameworks could significantly impact our operations, financial performance and business.
Laws and regulations relating to privacy, cybersecurity and data protection are quickly evolving, and any such proposed or new legal frameworks could significantly impact our operations, financial performance and business.
We cannot assure you that our business will generate sufficient cash flow from operations or that future borrowings will be available to us through capital markets financings, under credit facilities or otherwise, in an amount sufficient to enable us to repay our indebtedness, repurchase our 2023 Convertible Notes upon a fundamental change or settle conversions in cash, repurchase our Senior Notes upon a change of control or fund our other liquidity needs.
We cannot assure you that our business will generate sufficient cash flow from operations or that future borrowings will be available to us through capital markets financings, under credit facilities or otherwise, in an amount sufficient to enable us to repay our indebtedness, repurchase our Senior Notes upon a change of control or fund our other liquidity needs.
A disease outbreak, such as the COVID-19 pandemic, could adversely affect our business, results of operations and financial results if: • political, legal and regulatory actions and policies in response to disease outbreak may prevent us from performing our collection activities or result in material increases in our costs to comply with such laws and regulations; • consumers respond to a disease outbreak by failing to pay amounts owed to us as a result of factors that impact their ability to make payments; • we are unable to maintain staffing levels necessary to operate our business due to the continued spread of a disease outbreak causing employees to be unable or unwilling to work; • we are unable to collect on existing nonperforming loans or experience material decreases in our cash collections; or • we are unable to purchase nonperforming loans needed to operate our business because credit originators become unable or unwilling to sell their nonperforming loans consistent with historical levels.
A disease outbreak could adversely affect our business, results of operations and financial condition if: • political, legal and regulatory actions and policies in response to a disease outbreak prevent us from performing our collection activities or result in material increases in our costs to comply with such laws and regulations; • consumers respond to a disease outbreak by failing to pay amounts owed to us as a result of factors that impact their ability to make payments; • we are unable to maintain staffing levels necessary to operate our business due to the continued spread of a disease outbreak causing employees to be unable or unwilling to work; • we are unable to collect on existing nonperforming loans or experience material decreases in our cash collections; or • we are unable to purchase nonperforming loans needed to operate our business because credit originators become unable or unwilling to sell their nonperforming loans consistent with historical levels. 11 International Operations Risks Our international operations expose us to risks, which could harm our business, results of operations and financial condition.
Negative publicity relating to investigations or proceedings brought by governmental authorities could have an adverse impact on our reputation, harm our ability to conduct business with industry participants, and result in financial institutions reducing or eliminating sales of nonperforming loan portfolios to us which would harm our business and negatively impact our results of operations.
Negative publicity relating to investigations or proceedings brought by governmental authorities could have an adverse impact on our reputation, harm our ability to conduct business with industry participants and result in financial institutions reducing or eliminating sales of nonperforming loan portfolios to us.
Costs such as salaries and other compensation expense constitute a significant portion of our overhead and, if we do not replace the nonperforming loan portfolios we service with additional portfolios, we may have to reduce the number of our collection and other administrative personnel. We may then, have to rehire staff if we subsequently obtain additional portfolios.
Salaries and other compensation expense constitute a significant portion of our operating expenses and, if we do not replace the nonperforming loan portfolios we service with additional portfolios, we may have to reduce the number of our collection and other administrative personnel. We may then have to rehire staff if we subsequently obtain additional portfolios.
Our management team will consider a number of factors when evaluating our level of indebtedness and when making decisions regarding the incurrence of any new indebtedness, including the purchase price of assets to be acquired with debt financing, the estimated market value of our assets and the ability of particular assets and the Company as a whole, to generate cash flow to cover the expected debt service.
We will consider a number of factors when evaluating our level of indebtedness and when making decisions about incurring any new indebtedness, including the purchase price of assets to be acquired with debt financing, the estimated market value of our assets and the ability of particular assets, and the Company as a whole, to generate cash flow to cover the expected debt service.
These risks include: • adverse changes in macroeconomic conditions, the business climate, or the market for the entity's products or services; • significant variances between actual and expected financial results; • negative or declining cash flows; • lowered expectations of future results; • failure to realize anticipated synergies from acquisitions; • significant expense increases; • a more likely-than-not expectation of selling or disposing all, or a portion of, a reporting unit; • the loss of key personnel; • an adverse action or assessment by a regulator; • significant increase in discount rates; or • a sustained decrease in the price per share of our common stock.
These risks include: • adverse changes in macroeconomic conditions, the business climate, or the market for the entity's services; • significant variances between actual and expected financial results; • negative or declining cash flows; • lowered expectations of future results; • significant expense increases; • a more likely-than-not expectation of selling or disposing all, or a portion of, a reporting unit; • an adverse action or assessment by a regulator; • significant increase in discount rates; or • a sustained decrease in the price per share of our common stock.
We are monitoring the enactment of Pillar Two legislation in EU countries and elsewhere to determine its potential impact on our financial results as well as monitoring U.S. amendments to the U.S. global intangible low-tax income ("GILTI"), if any. The implementation of Pillar Two and amendments to GILTI could significantly increase our U.S. and international income taxes.
We are monitoring the enactment of Pillar Two legislation in EU countries and elsewhere to determine the potential impact on our financial results, as well as monitoring U.S. amendments to the U.S. global intangible low-tax income ("GILTI"), if any.
The regulation of data privacy in the U.S and globally could have an adverse effect on our business, results of operations and financial condition by increasing our compliance costs or exposing us to the risk of liability.
The regulation of data privacy in the U.S and globally, or an inability to effectively manage our data governance structures, could have an adverse effect on our business, results of operations and financial condition by increasing our compliance costs, exposing us to the risk of liability or decreasing our competitiveness.
In such circumstances, authorities may request or seek to impose a range of remedies that could involve potential compensatory or punitive damage claims, fines, restitution payments, sanctions or injunctive relief, that if agreed to or granted, could require us to make payments or incur other expenditures that could have an adverse effect on our results of operations or financial position.
In such circumstances, authorities may request or seek to impose a range of remedies that could involve potential compensatory or punitive damage claims, fines, restitution payments, sanctions or injunctive relief, that if agreed to or granted, could require us to make payments or incur other expenditures.
In addition, local requirements and court rulings in various jurisdictions may affect our ability to collect. Regulations and statutes applicable to our industry further provide that, in some cases, consumers cannot be held liable for, or their liability may be limited with respect to, charges to their debit or credit card accounts that resulted from unauthorized use of their credit.
Regulations and statutes applicable to our industry further provide that, in some cases, consumers cannot be held liable for, or their liability may be limited with respect to, charges to their debit or credit card accounts that resulted from unauthorized use of their credit.
The agreements governing our indebtedness include provisions that may restrict our financial and business operations. Our credit facilities and the indentures that govern our 2023 Convertible Notes and our Senior Notes contain financial and other restrictive covenants, including restrictions on how we operate our business and our ability to pay dividends to our stockholders.
The agreements governing our indebtedness include provisions that may restrict our financial and business operations. Our credit facilities and the indentures that govern our Senior Notes contain financial and other restrictive covenants, including restrictions on certain types of transactions and our ability to pay dividends to our stockholders.
For example, deterioration in the financial markets, including as a result of a disease outbreak, such as the COVID-19 pandemic, could contribute to the insolvency of lending institutions, notably those providing our credit facilities, or the tightening of credit markets, which could make it difficult or impossible for us to obtain credit on favorable terms or at all.
For example, deterioration in the financial markets could contribute to the insolvency of lending institutions, notably those providing our credit facilities, or the tightening of credit markets, which could make it difficult or impossible for us to obtain credit on favorable terms or at all.
Cybersecurity and Technology Risks A cybersecurity incident could damage our reputation and adversely impact our business and financial results. Our business is highly dependent on our ability to process and monitor a large number of transactions across markets and in multiple currencies. We rely on information technology systems to conduct our business, including systems developed and administered by third parties.
Our business is highly dependent on our ability to process and monitor a large number of transactions across markets and in multiple currencies. We rely on information technology systems to conduct our business, including systems developed and administered by third parties.
Although we believe we have implemented the requirements of the Consent Order, 13 there can be no assurance that additional litigation or new industry regulations currently under consideration by the CFPB would not have an adverse effect on our business, results of operations and financial condition.
Although we believe that we will comply with the requirements of the 2023 Order, there can be no assurance we will implement each requirement to the satisfaction of the CFPB or that additional litigation or new industry regulations currently under consideration by the CFPB would not have an adverse effect on our business, results of operations and financial condition.
As of December 31, 2022, we had total consolidated indebtedness of approximately $2.5 billion, all of which, except for $345.0 million outstanding principal amount of our 3.50% Convertible Notes due 2023 (the "2023 Convertible Notes"), $300.0 million outstanding principal amount of our 7.375% Senior Notes due 2025 (the "2025 Notes"), and $350.0 million outstanding principal amount of our 5.00% Senior Notes due 2029 (the "2029 Notes" and together with the 2025 Notes, the "Senior Notes"), was secured indebtedness.
As of December 31, 2023, we had total consolidated indebtedness of $2.9 billion, all of which, except for $298.0 million outstanding principal amount of our 7.375% Senior Notes due 2025 (the "2025 Notes"), $398.0 million outstanding principal amount of our 8.375% Senior Notes due 2028 (the "2028 Notes") and $350.0 million outstanding principal amount of our 5.00% Senior Notes due 2029 (the "2029 Notes", and together with the 2028 Notes and 2025 Notes, the "Senior Notes"), was secured indebtedness.
If we are unable to maintain our business or adapt to changing market needs as well as our current or future competitors, we may experience reduced access to nonperforming loan portfolios at appropriate prices and, therefore, reduced profitability. We may not be able to collect sufficient amounts on our nonperforming loans to fund our operations.
If we are unable to maintain our business or adapt to changing market needs as well as our current or future competitors, we may experience reduced access to nonperforming loan portfolios at appropriate prices and, therefore, reduced profitability.
We may not be able to generate sufficient cash flow to meet our debt service obligations. Our ability to generate sufficient cash flow from operations to make scheduled payments on our debt obligations will depend on our current and future financial performance, which is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.
Our ability to generate sufficient cash flow from operations to make scheduled payments on our debt obligations will depend on our current and future financial performance, which in part depends on general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.
Although we believe our estimates are reasonable, the ultimate tax outcome may differ from the amounts recorded in our financial statements and may adversely or beneficially affect our financial results in the period(s) for which such determination is made.
Although we believe our estimates are reasonable, the ultimate tax outcome may differ from the amounts recorded in our financial statements and may adversely or beneficially affect our financial results in the period(s) for which such determination is made. Financial and Liquidity Risks We expect to use leverage in executing our business strategy, which may have adverse consequences.
Some laws, among other things, also may limit the interest rate and the fees that a credit originator may impose on our consumers, limit the time in which we may file legal actions to enforce consumer accounts and require specific account information for certain collection activities.
Some laws, among other things, also may limit the interest rate and fees we may impose on our consumers, limit the time in which we may file legal actions to enforce consumer accounts and require specific account information for certain collection activities. In addition, local requirements and court rulings in various jurisdictions may affect our ability to collect.
This could expose us to adverse economic, industry and political conditions that may have a negative impact on our ability to manage our existing operations or pursue alternative strategic transactions, which could have a negative effect on our business, results of operations and financial condition.
A significant portion of our operations is conducted outside the U.S. This could expose us to adverse economic, industry and political conditions that may have a negative impact on our ability to manage our existing operations, which could have a negative effect on our business, results of operations and financial condition.
We cannot assure you that any such actions, if necessary, could be effected on commercially reasonable terms or at all, or on terms that would be advantageous to our stockholders or on terms that would not require us to breach the terms and conditions of our existing or future debt agreements.
We cannot assure you that any such actions, if necessary, could be effected on commercially reasonable terms or at all, or on terms that would be advantageous to our stockholders or on terms that would not require us to breach the terms and conditions of our existing or future debt agreements. 15 We may not be able to generate sufficient cash flow or complete alternative financing plans, including raising additional capital, to meet our debt service obligations.
The application and enforcement of these evolving legal requirements is uncertain and may require us to further change or update our information practices, and could impose additional compliance costs and regulatory scrutiny. We may incur significant costs complying with legal obligations and inquiries, investigations or any other government actions related to privacy, cybersecurity, and data protection.
The application and enforcement of these evolving legal requirements is uncertain and may require us to further change or update our information practices, and could impose additional compliance costs and regulatory scrutiny.
Our goodwill impairment testing involves the use of estimates and the exercise of judgment, including judgments regarding expected future business performance and market conditions.
Our goodwill impairment testing involves the use of estimates and the exercise of judgment, including judgments regarding expected future business performance and market conditions. Based on our October 1, 2023, impairment test, we concluded that the goodwill of our reporting units was not impaired.
However, any such disruption could have significant consequences for our business, including financial loss and reputational damage. The underperformance or failure of our information technology infrastructure, networks or communication systems could result in loss in productivity, loss of competitive advantage and business disruption. We depend on effective information and communication systems to operate our business.
The underperformance or failure of our information technology infrastructure, networks or communication systems could result in a loss in productivity, loss of competitive advantage and business disruption. We depend on effective information and communication systems to operate our business. Significant resources are required to maintain or enhance our existing information and telephone systems and to replace obsolete systems.
In addition, as of December 31, 2022, we had total committed revolving borrowing capacity of $1.6 billion available under our credit facilities, all of which if borrowed would be secured indebtedness. Considering borrowing base restrictions and other covenants, the amount available to be borrowed under our credit facilities would have been $465.1 million as of December 31, 2022.
In addition, as of December 31, 2023, we had total committed revolving borrowing capacity of $2.7 billion available under our credit facilities, all of which if borrowed would be secured indebtedness.
If we fail to comply with any applicable laws and regulations discussed above, such failure could result in penalties, litigation losses and expenses, damage to our reputation, or otherwise impact our ability to conduct collections efforts, which could adversely affect our business, results of operations and financial condition.
If we fail to comply with any applicable laws and regulations discussed above, such failure could result in penalties, litigation losses and expenses, damage to our reputation, or otherwise impact our ability to conduct collections efforts, which could adversely affect our business, results of operations and financial condition. 13 Investigations, reviews or enforcement actions by governmental authorities may result in changes to our business practices, negatively impact our nonperforming loan portfolio acquisition volume, make collection of nonperforming loans more difficult or expose us to the risk of fines, penalties, restitution payments and litigation .
Additionally, such cybersecurity events could cause reputational damage and subject us to fines, penalties, litigation costs and settlements and financial losses that may not be fully covered by our cybersecurity insurance. To date, disruptions to our information technology systems, due to outages, security breaches or other causes, including cybersecurity incidents have not had a material impact on our business.
Additionally, such cybersecurity events could cause reputational damage and subject us to fines, penalties, litigation costs and settlements and financial losses that may not be fully covered by our cybersecurity insurance.
Our principal business consists of purchasing and collecting nonperforming loans that consumers or others have failed to pay. The credit originators have typically made numerous attempts to recover on their accounts, often using a combination of in-house recovery efforts and third-party collection agencies.
The credit originators have typically made numerous attempts to recover on their accounts, often using a combination of in-house recovery efforts and third-party collection agencies. These nonperforming loans are difficult to collect, and we may not collect a sufficient enough amount to cover our investment and the costs of running our business.
In September 2015, Portfolio Associates, LLC ("PRA"), our wholly owned subsidiary, entered into a consent order with the CFPB settling a previously disclosed investigation of certain debt collection practices of PRA (the "Consent Order").
In April 2023, Portfolio Recovery Associates, LLC ("PRA"), our wholly owned subsidiary, entered into an order with the CFPB settling a previously disclosed investigation of certain debt collection practices of PRA (the "2023 Order"). We are currently implementing our redress plan and have submitted our compliance plan to the CFPB for review.
These conditions could include regulatory developments, changes in global or domestic economic policy, legislative changes, and sovereign debt crises. Deterioration in economic conditions, or a significant rise in inflation could cause personal bankruptcy and insolvency filings to increase, and the ability of consumers to pay their debts could be adversely affected.
These conditions could include changes in global or domestic economic policy and sovereign debt crises. Deterioration in economic conditions, or a significant rise in inflation or high level of sustained inflation, could negatively affect the ability of consumers to pay their debts. This may in turn adversely impact our business and financial results.
Additionally, new or pending international regulations, such as the EU Directive (2021/2167) on Credit Servicers and Credit Purchasers and the Financial Conduct Authority’s Consumer Duty proposals, could adversely affect our operations in Europe once they are effective and require implementation.
Violations of these laws could also adversely affect our business, brand, international expansion efforts, ability to attract and retain employees and results of operations. 12 Additionally, pending international regulations, such as the EU Directive (2021/2167) on Credit Servicers and Credit Purchasers, could adversely affect our operations in Europe once they are effective and require implementation.
Although we take a number of steps to protect our information technology systems, the attacks that companies have experienced have increased in number, sophistication and complexity over the past few years. Accordingly, we may suffer data security incidents or other cybersecurity incidents, which could compromise our systems and networks, creating system disruptions and exploiting vulnerabilities in our products and services.
Accordingly, we may suffer data security incidents or other cybersecurity incidents, which could compromise our systems and networks, creating system disruptions and exploiting vulnerabilities in our services.
An unfavorable resolution of a legal proceeding or claim could adversely impact our business, financial condition, results of operations, or liquidity. For more information, refer to the " Litigation and Regulatory Matters " section of Note 14 to our Consolidated Financial Statements included in Item 8 of this Form 10-K.
An unfavorable resolution of a legal proceeding or claim could adversely impact our business, financial condition, results of operations or liquidity. A disease outbreak could have an adverse effect on our business, results of operations and financial condition.
Removed
This may in turn adversely impact our business and financial results.
Added
We may not be able to collect sufficient amounts to fund our operations due to the purchase of nonperforming loans that ultimately prove to be unprofitable. Our principal business consists of purchasing and collecting nonperforming loans that consumers or others have failed to pay.
Removed
Furthermore, heightened regulation of the credit card and consumer lending industry or changing credit origination strategies may result in decreased availability of credit to consumers, potentially leading to a future reduction in nonperforming loans available for purchase from credit originators.
Added
Furthermore, if the statistical models we use to make cash flow projections as part of our underwriting process are inaccurate, we may acquire nonperforming loan portfolios that ultimately prove to be unprofitable. Moreover, if we experience operational issues in making collections on our nonperforming loan portfolios, we may incur losses on portfolios that would have otherwise been profitable.
Removed
These nonperforming loans are difficult to collect, and we may not collect a sufficient amount to cover our investment and the costs of running our business. Our collections may decrease if certain types of insolvency proceedings and bankruptcy filings involving liquidations increase.
Added
We outsource and offshore certain activities related to our business to third parties. Any disruption or failure of these third parties to provide these services could adversely affect our business operations, financial condition and reputation. We use third parties to conduct collection and other activities through outsourcing and offshoring.
Removed
Various economic trends and potential changes to existing legislation may contribute to an increase in the amount of personal bankruptcy and insolvency filings.
Added
These third parties include law firms, collection agencies, data providers, tracing service providers, business process outsourcing and information technology firms. One or more of these third parties could fail to meet its obligations and service level expectations, become insolvent or cease operations, which could adversely impact our business operations and financial condition.
Removed
Under certain of these filings, a debtor's assets may be sold to repay creditors, but because most of the accounts we collect through our collections operations are unsecured, we typically would not be able to collect on those accounts.
Added
Furthermore, we may not be able to find alternative third parties in a timely manner on terms that are acceptable to us or because of contractual restrictions that limit our flexibility in responding to disruptions at these vendors, resulting in operational inefficiencies.
Removed
Although our insolvency collections business could benefit from an increase in personal bankruptcies and insolvencies, we cannot ensure that our collections operations business would not decline with an increase in personal insolvencies or bankruptcy filings or changes in related regulations or practices.
Added
If any of these third-party service providers violate laws, regulatory requirements, contractual obligations, or act inappropriately in the conduct of their business, our operations and reputation could be negatively impacted and result in regulatory fines and penalties. Any of these factors could cause our business, financial condition, operations and reputation to be adversely affected.
Removed
If our actual collection experience with respect to a nonperforming or insolvent bankrupt accounts are significantly lower than the total amount we projected when we acquired the portfolio, our financial condition and results of operations could be adversely impacted. Goodwill impairment charges could negatively impact our net income and stockholder's equity.
Added
Additionally, offshoring could expose performance of these activities to the risks described under International Operations Risks within this section.
Removed
Significant changes in our assessment of such factors, 10 including the deterioration of market conditions, could affect our assessment of the fair value of one or more of our reporting units and could result in a goodwill impairment charge in a future period. A disease outbreak could have an adverse effect on our business, results of operations and financial results.
Added
We may not be successful in implementing, or in anticipating, the impact of our cash collections generating and cost-related operational initiatives in our U.S. business, and our plans for implementing such initiatives may be altered or delayed due to various factors, which could have an adverse impact on our business and results of operations.
Removed
International Operations Risks Our international operations expose us to risks which could harm our business, results of operations and financial condition. A significant portion of our operations is conducted outside the U.S.
Added
Our future growth depends, in part, on our ability to generate higher cash collections at a lower marginal cost through effective execution.
Removed
Violations of these laws could also adversely affect our business, brand, international expansion efforts, ability to attract and retain employees and results of operations.
Added
In our U.S. business, we continue to identify and implement initiatives that we believe will position our business for long-term sustainable growth and profitability by allowing us to achieve a lower marginal cost structure and to execute effectively, particularly around customer contact strategies and post-judgment legal collection processes.
Removed
Investigations, reviews or enforcement actions by governmental authorities may result in changes to our business practices; negatively impact our nonperforming loan portfolio acquisition volume; make collection of nonperforming loans more difficult; or expose us to the risk of fines, penalties, restitution payments and litigation .
Added
It is possible that the implementation of some of these initiatives could be altered or delayed or result in unintended consequences, such as business disruptions, distraction of management and employees, reduced productivity, unexpected employee attrition or an inability to attract or retain key personnel.
Removed
As further discussed in the " Litigation and Regulatory Matters " section of Note 14 to our Consolidated Financial Statements included in Item 8 of this Form 10-K, we are in discussions with the CFPB regarding CIDs and requests for information issued by the CFPB to us related to our compliance with the Consent Order and applicable law.
Added
If we are unable to successfully implement our initiatives as planned, or do not achieve the expected impacts as a result of these initiatives, we may not realize all or any of the anticipated benefits, resulting in a failure to meet our future business objectives. 10 Goodwill impairment charges could negatively impact our net income and stockholder's equity.
Removed
Financial and Liquidity Risks We expect to use leverage in executing our business strategy, which may adversely affect the return on our assets. We may incur a substantial amount of debt in the future. Our existing indebtedness is recourse to us, and we anticipate that future indebtedness will likewise be recourse.
Added
However, we estimated that our Debt Buying and Collection ("DBC") reporting unit’s fair value exceeded its carrying value by 6%, and therefore, the reporting unit may be at-risk for future impairment if our cash flow projections are not met or if market factors utilized in the impairment test deteriorate, including adverse changes in the debt sales market and an increase in the discount rate.
Removed
We have also acquired and expect to acquire additional systems as a result of business acquisitions. Significant resources are required to maintain or enhance our existing information and telephone systems and to replace obsolete systems.
Added
While we currently do not expect the implementation of Pillar Two and amendments to GILTI will significantly increase our U.S. and international income taxes, there is a risk the final enactment could cause a material increase in our income tax expense and payments.
Added
If we fail to effectively implement and maintain data governance structures across our business, or to effectively interpret and utilize such data, our operations could be exposed to additional adverse impacts, and we could be at a competitive disadvantage. In addition, we rely on data provided to us by credit reference agencies and servicing providers.
Added
If these agencies and service providers were to stop providing us with data for any reason, for example, due to a change in governmental regulation, there could be a material adverse effect on our business, results of operations and financial condition.
Added
We may incur significant costs complying with legal obligations and inquiries, investigations or any other government actions related to privacy, cybersecurity, and data protection.
Added
We may incur a substantial amount of debt in the future.
Added
Total availability under these credit facilities as of December 31, 2023, was $1.3 billion, comprised of $344.4 million based on current estimated remaining collections ("ERC"), and $938.5 million of additional availability subject to debt covenants, including advance rates.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties. Our corporate headquarters and primary domestic operations facilities are located in Norfolk, Virginia. In addition, at December 31, 2022 , we ha d 15 operational centers in the Americas and Australia (12 leas ed and three owned), and nine in Europe (all leased).
Biggest changeItem 2. Properties. Our corporate headquarters are located in Norfolk, Virginia. In addition, as of December 31, 2023 , we h a d 10 operational centers in the Americas (eight leased and two owned), eight in Europe (all leased) and two in Australia (all leased).

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeRefe r to Note 14 to our Consolidated Financial Statements included in Item 8 of this Form 10-K for information regarding legal proceedings in which we are involved. 16 Item 4. Mine Safety Disclosures. Not applicable. 17 PART II
Biggest changeRefe r to the " Litigation and Regulatory Matters " section of Note 14 to our Consolidated Financial Statements included in Item 8 of this Form 10-K for information regarding legal proceedings in which we are involved. Item 4. Mine Safety Disclosures. Not applicable. 19 PART II
Also, customers, either individually, as members of a class action, or through a governmental entity on behalf of customers, may initiate litigation against us in which they allege that we have violated a state or federal law in the process of collecting on an account. From time to time, other types of lawsuits are brought against us.
Also, customers, either individually, as members of a class action, or through 18 a governmental entity on behalf of customers, may initiate litigation against us in which they allege that we have violated a state or federal law in the process of collecting on an account. From time to time, other types of lawsuits are brought against us.
Item 3. Legal Proceedings. We and our subsidiaries are from time to time subject to a variety of routine legal and regulatory claims, inquiries and proceedings, most of which are incidental to the ordinary course of our business. We initiate lawsuits against customers and are occasionally countersued by them in such actions.
Item 3. Legal Proceedings. We and our subsidiaries are from time to time subject to a variety of legal and regulatory claims, inquiries and proceedings, most of which are incidental to the ordinary course of our business. We initiate lawsuits against customers and are occasionally countersued by them in such actions.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePRAA $ 100 $ 73 $ 109 $ 119 $ 151 $ 102 Nasdaq Financial 100 IXF $ 100 $ 92 $ 119 $ 123 $ 156 $ 119 Nasdaq Global Market Composite Index NQGM $ 100 $ 94 $ 129 $ 213 $ 180 $ 100 The comparisons of stock performance shown above are not intended to forecast or be indicative of possible future performance of our common stock.
Biggest changePRAA $ 100.0 $ 149.0 $ 162.7 $ 206.0 $ 138.6 $ 107.5 Nasdaq Financial 100 IXF $ 100.0 $ 129.5 $ 134.3 $ 170.9 $ 129.7 $ 146.7 Nasdaq Global Market Composite Index NQGM $ 100.0 $ 137.9 $ 227.3 $ 192.9 $ 106.7 $ 113.6 The comparisons of stock performance shown above are not intended to forecast or be indicative of possible future performance of our common stock.
Any future determination as to the declaration and payment of dividends will be at the discretion of our Board of Directors and will depend on conditions then existing, including our results of operations, financial condition, contractual restrictions, capital requirements, business prospects and other factors that our Board of Directors may consider relevant. 18 Recent Sales of Unregistered Securities None.
Any future determination as to the declaration and payment of dividends will be at the discretion of our Board of Directors and will depend on conditions then existing, including our results of operations, financial condition, contractual restrictions, capital requirements, business prospects and other factors that our Board of Directors may consider relevant. 20 Recent Sales of Unregistered Securities None.
We do not currently pay regular dividends on our common stock and did not pay dividends during the three years ended December 31, 2022; however, our Board of Directors may determine in the future to declare or pay dividends on our common stock.
We do not currently pay regular dividends on our common stock and did not pay dividends during the three years ended December 31, 2023; however, our Board of Directors may determine in the future to declare or pay dividends on our common stock.
Any dividends paid during the five-year period are assumed to be reinvested. Ticker 2017 2018 2019 2020 2021 2022 PRA Group, Inc.
Any dividends paid during the five-year period are assumed to be reinvested. Ticker 2018 2019 2020 2021 2022 2023 PRA Group, Inc.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Common Stock Our common stock is traded on Nasdaq Global Select Market under the symbol "PRAA." Based on information provided by our transfer agent and registrar, as of February 21, 2023, there were 44 holders of record.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Common Stock Our common stock is traded on the Nasdaq Global Select Market under the symbol "PRAA". Based on information provided by our transfer agent and registrar, as of February 20, 2024 , there were 45 holders of record.
Stock Performance The following graph and subsequent table compare from December 31, 2017 to December 31, 2022, the cumulative stockholder returns assuming an initial investment of $100 in our common stock (PRAA), the stocks comprising the Nasdaq Financial 100 (IXF) and the stocks comprising the Nasdaq Global Market Composite Index (NQGM) at the beginning of the period.
Stock Performance The following gra ph and subsequent table compare, from December 31, 2018 to December 31, 2023, cumulative stockholder returns assuming an initial investment of $100 in our common stock (PRAA), the stocks comprising the Nasdaq Financial 100 (IXF) and the stocks comprising the Nasdaq Global Market Composite Index (NQGM) at the beginning of the period.
We did not repurchase any common stock during the fourth quarter of the year ended December 31, 2022. Item 6. [Reserved] 19
We did not repurchase any common stock during the fourth quarter of the year ended December 31, 2023. Item 6. [Reserved] 21
Our credit facilities and the indentures that govern our 2023 Convertible Notes, 2025 Notes and 2029 Notes contain financial and other restrictive covenants, including restrictions on how we operate our business and our ability to pay dividends to our stockholders.
Our credit facilities and the indentures that govern our Senior Notes contain financial and other restrictive covenants, including restrictions on certain types of transactions and our ability to pay dividends to our stockholders.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeFinancial Statements and Supplementary Data 39 Report s of Independent Registered Public Accounting Fir ms 40 Consolidated Balance Sheets 43 Consolidated Income Statements 44 Consolidated Statements of Comprehensive Income 45 Consolidated Statements of Changes in Equity 46 Consolidated Statements of Cash Flows 47 Notes to Consolidated Financial Statements 48 1 – General and Summary of Significant Accounting Policies 48 2 – Finance Receivables, net 53 3 – Investments 56 4 – Leases 57 5 – Goodwill 58 6 – Borrowings 58 7 – Property and Equipment, net 63 8 – Fair Value 63 9 – Derivatives 65 10 – Accumulated Other Comprehensive Loss 66 11 – Share-Based Compensation 67 12 – Earnings per Share 69 13 – Income Taxes 69 14 – Commitments and Contingencies 72 15 – Retirement Plans 74 16 – Subsequent Events 74
Biggest changeFinancial Statements and Supplementary Data 42 Reports of Independent Registered Public Accounting Firms 43 Consolidated Balance Sheets 47 Consolidated Income Statements 48 Consolidated Statements of Comprehensive Income 49 Consolidated Statements of Changes in Equity 50 Consolidated Statements of Cash Flows 51 Notes to Consolidated Financial Statements 52 1 – General and Summary of Significant Accounting Policies 52 2 – Finance Receivables, net 58 3 – Investments 60 4 – Goodwill 61 5 – Leases 61 6 – Property and Equipment, net 62 7 – Borrowings 63 8 - Derivatives 67 9 – Fair Value 68 10 – Accumulated Other Comprehensive Loss 70 11 – Share-Based Compensation 71 12 – Earnings per Share 73 13 – Income Taxes 73 14 – Commitments and Contingencies 75 15 – Retirement Plans 76
Item 6. [Reserved] 19 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 20 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 37 Item 8.
Item 6. [Reserved] 21 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 22 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 41 Item 8.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest change(3) Non-U.S. amounts are presented at the December 31, 2022 exchange rate. 27 Cash Collections by Year, By Year of Purchase (1) as of December 31, 2022 Amounts in millions Cash Collections Purchase Period Purchase Price (3)(4) 1996-2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Total Americas and Australia Core 1996-2012 $ 1,541.9 $ 2,962.4 $ 554.9 $ 412.5 $ 280.4 $ 179.0 $ 118.0 $ 83.8 $ 62.9 $ 41.5 $ 29.8 $ 23.5 $ 4,748.7 2013 390.8 — 101.6 247.8 194.0 120.8 78.9 56.4 36.9 23.2 16.7 12.5 888.8 2014 404.1 — — 92.7 253.4 170.3 114.2 82.2 55.3 31.9 22.3 15.0 837.3 2015 443.1 — — — 117.0 228.4 185.9 126.6 83.6 57.2 34.9 19.5 853.1 2016 455.8 — — — 138.7 256.5 194.6 140.6 105.9 74.2 38.4 948.9 2017 532.9 — — — — — 107.3 278.7 256.5 192.5 130.0 76.3 1,041.3 2018 654.0 — — — — — — 122.7 361.9 337.7 239.9 146.1 1,208.3 2019 581.5 — — — — — — — 143.8 349.0 289.8 177.7 960.3 2020 435.7 — — — — — — — — 133.0 284.3 192.0 609.3 2021 435.8 — — — — — — — — — 85.0 177.3 262.3 2022 406.1 — — — — — — — — — — 67.8 67.8 Subtotal 6,281.7 2,962.4 656.5 753.0 844.8 837.2 860.8 945.0 1,141.5 1,271.9 1,206.9 946.1 12,426.1 Americas Insolvency 1996-2012 1,038.2 1,021.6 417.3 338.8 208.3 105.3 37.7 8.3 4.0 2.2 1.4 1.1 2,146.0 2013 227.8 — 52.5 82.6 81.7 63.4 47.8 21.9 2.9 1.3 0.8 0.5 355.4 2014 148.4 — — 37.0 50.9 44.3 37.4 28.8 15.8 2.2 1.1 0.7 218.2 2015 63.2 — — — 3.4 17.9 20.1 19.8 16.7 7.9 1.3 0.6 87.7 2016 91.4 — — — — 18.9 30.4 25.0 19.9 14.4 7.4 1.8 117.8 2017 275.3 — — — — — 49.1 97.3 80.9 58.8 44.0 20.8 350.9 2018 97.9 — — — — — — 6.7 27.4 30.5 31.6 24.6 120.8 2019 123.1 — — — — — — — 13.4 31.4 39.1 37.8 121.7 2020 62.1 — — — — — — — — 6.5 16.1 20.4 43.0 2021 55.2 — — — — — — — — — 4.5 17.9 22.4 2022 33.4 — — — — — — — — — — 3.2 3.2 Subtotal 2,216.0 1,021.6 469.8 458.4 344.3 249.8 222.5 207.8 181.0 155.2 147.3 129.4 3,587.1 Total Americas and Australia 8,497.7 3,984.0 1,126.3 1,211.4 1,189.1 1,087.0 1,083.3 1,152.8 1,322.5 1,427.1 1,354.2 1,075.5 16,013.2 Europe Core 2012 20.4 11.6 9.0 5.6 3.2 2.2 2.0 2.0 1.5 1.2 1.2 0.9 40.4 2013 20.3 — 7.1 8.5 2.3 1.3 1.2 1.3 0.9 0.7 0.7 0.5 24.5 2014 (2) 773.8 — — 153.2 292.0 246.4 220.8 206.3 172.9 149.8 149.2 122.2 1,712.8 2015 411.3 — — — 45.8 100.3 86.2 80.9 66.1 54.3 51.4 40.7 525.7 2016 333.1 — — — — 40.4 78.9 72.6 58.0 48.3 46.7 36.9 381.8 2017 252.2 — — — — — 17.9 56.0 44.1 36.1 34.8 25.2 214.1 2018 341.8 — — — — — — 24.3 88.7 71.2 69.1 50.7 304.0 2019 518.6 — — — — — — — 47.9 125.7 121.4 89.8 384.8 2020 324.1 — — — — — — — — 32.4 91.7 69.0 193.1 2021 412.4 — — — — — — — — — 48.4 89.9 138.3 2022 359.5 — — — — — — — — — — 33.9 33.9 Subtotal 3,767.5 11.6 16.1 167.3 343.3 390.6 407.0 443.4 480.1 519.7 614.6 559.7 3,953.4 Europe Insolvency 2014 (2) 10.9 — — — 4.3 3.9 3.2 2.6 1.5 0.8 0.3 0.3 16.9 2015 19.0 — — — 3.0 4.4 5.0 4.8 3.9 2.9 1.6 0.6 26.2 2016 39.3 — — — — 6.2 12.7 12.9 10.7 7.9 6.0 2.7 59.1 2017 39.2 — — — — — 1.2 7.9 9.2 9.8 9.4 6.5 44.0 2018 44.9 — — — — — — 0.6 8.4 10.3 11.7 9.8 40.8 2019 77.2 — — — — — — — 5.1 21.1 23.9 21.0 71.1 2020 105.4 — — — — — — — — 6.1 34.6 34.1 74.8 2021 53.3 — — — — — — — — — 5.4 14.4 19.8 2022 44.6 — — — — — — — — — — 4.5 4.5 Subtotal 433.8 — — — 7.3 14.5 22.1 28.8 38.8 58.9 92.9 93.9 357.2 Total Europe 4,201.3 11.6 16.1 167.3 350.6 405.1 429.1 472.2 518.9 578.6 707.5 653.6 4,310.6 Total PRA Group $ 12,699.0 $ 3,995.6 $ 1,142.4 $ 1,378.7 $ 1,539.7 $ 1,492.1 $ 1,512.4 $ 1,625.0 $ 1,841.4 $ 2,005.7 $ 2,061.7 $ 1,729.1 $ 20,323.8 (1) Non-U.S. amounts are presented using the average exchange rates during the cash collection period.
Biggest change(3) Non-U.S. amounts are presented at the December 31, 2023 exchange rate. 30 Cash Collections by Year, By Year of Purchase (1) as of December 31, 2023 Amounts in millions Cash Collections Purchase Period Purchase Price (3)(4) 1996-2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Total Americas and Australia Core 1996-2013 $ 1,932.7 $ 3,618.9 $ 660.3 $ 474.4 $ 299.7 $ 197.0 $ 140.3 $ 99.7 $ 64.7 $ 46.5 $ 36.0 $ 28.4 $ 5,665.9 2014 404.1 — 92.7 253.4 170.3 114.2 82.2 55.3 31.9 22.3 15.0 11.8 849.1 2015 443.1 — — 117.0 228.4 185.9 126.6 83.6 57.2 34.9 19.5 14.1 867.2 2016 455.8 — — — 138.7 256.5 194.6 140.6 105.9 74.2 38.4 24.9 973.8 2017 532.9 — — — — 107.3 278.7 256.5 192.5 130.0 76.3 43.8 1,085.1 2018 654.0 — — — — — 122.7 361.9 337.7 239.9 146.1 92.9 1,301.2 2019 581.5 — — — — — — 143.8 349.0 289.8 177.7 110.3 1,070.6 2020 435.7 — — — — — — — 132.9 284.3 192.0 125.8 735.0 2021 435.8 — — — — — — — — 85.0 177.3 136.8 399.1 2022 406.1 — — — — — — — — — 67.7 195.4 263.1 2023 622.6 — — — — — — — — — — 108.5 108.5 Subtotal 6,904.3 3,618.9 753.0 844.8 837.1 860.9 945.1 1,141.4 1,271.8 1,206.9 946.0 892.7 13,318.6 Americas Insolvency 1996-2013 1,266.1 1,491.4 421.4 289.9 168.7 85.5 30.3 6.8 3.6 2.2 1.6 1.1 2,502.5 2014 148.4 — 37.0 50.9 44.3 37.4 28.8 15.8 2.2 1.1 0.7 0.4 218.6 2015 63.2 — — 3.4 17.9 20.1 19.8 16.7 7.9 1.3 0.6 0.3 88.0 2016 91.4 — — — 18.9 30.4 25.0 19.9 14.4 7.4 1.8 0.9 118.7 2017 275.3 — — — — 49.1 97.3 80.9 58.8 44.0 20.8 4.9 355.8 2018 97.9 — — — — — 6.7 27.4 30.5 31.6 24.6 12.7 133.5 2019 123.1 — — — — — — 13.4 31.4 39.1 37.8 28.7 150.4 2020 62.1 — — — — — — — 6.5 16.1 20.4 19.5 62.5 2021 55.2 — — — — — — — — 4.6 17.9 17.5 40.0 2022 33.4 — — — — — — — — — 3.2 9.2 12.4 2023 91.3 — — — — — — — — — — 9.0 9.0 Subtotal 2,307.4 1,491.4 458.4 344.2 249.8 222.5 207.9 180.9 155.3 147.4 129.4 104.2 3,691.4 Total Americas and Australia 9,211.7 5,110.3 1,211.4 1,189.0 1,086.9 1,083.4 1,153.0 1,322.3 1,427.1 1,354.3 1,075.4 996.9 17,010.0 Europe Core 2012-2013 40.7 27.7 14.2 5.5 3.5 3.3 3.3 2.4 1.9 1.8 1.4 1.0 66.0 2014 (2) 773.8 — 153.2 292.0 246.4 220.8 206.3 172.9 149.8 149.2 122.2 107.6 1,820.4 2015 411.3 — — 45.8 100.3 86.2 80.9 66.1 54.3 51.4 40.7 33.8 559.5 2016 333.1 — — — 40.4 78.9 72.6 58.0 48.3 46.7 36.9 29.7 411.5 2017 252.2 — — — — 17.9 56.0 44.1 36.1 34.8 25.2 20.2 234.3 2018 341.8 — — — — — 24.3 88.7 71.3 69.1 50.7 41.6 345.7 2019 518.6 — — — — — — 48.0 125.7 121.4 89.8 75.1 460.0 2020 324.1 — — — — — — — 32.3 91.7 69.0 56.1 249.1 2021 412.4 — — — — — — — — 48.5 89.9 73.0 211.4 2022 359.4 — — — — — — — — — 33.9 83.8 117.7 2023 410.6 — — — — — — — — — — 50.2 50.2 Subtotal 4,178.0 27.7 167.4 343.3 390.6 407.1 443.4 480.2 519.7 614.6 559.7 572.1 4,525.8 Europe Insolvency 2014 (2) 10.9 — — 4.3 3.9 3.2 2.6 1.5 0.8 0.3 0.2 0.2 17.0 2015 19.0 — — 3.0 4.4 5.0 4.8 3.9 2.9 1.6 0.6 0.4 26.6 2016 39.3 — — — 6.2 12.7 12.9 10.7 7.9 6.0 2.7 1.3 60.4 2017 39.2 — — — — 1.2 7.9 9.2 9.8 9.4 6.5 3.8 47.8 2018 44.9 — — — — — 0.6 8.4 10.3 11.7 9.8 7.2 48.0 2019 77.2 — — — — — — 5.0 21.1 23.9 21.0 17.5 88.5 2020 105.4 — — — — — — — 6.0 34.6 34.1 29.7 104.4 2021 53.2 — — — — — — — — 5.5 14.4 14.7 34.6 2022 44.6 — — — — — — — — — 4.5 12.4 16.9 2023 46.6 — — — — — — — — — — 4.2 4.2 Subtotal 480.3 — — 7.3 14.5 22.1 28.8 38.7 58.8 93.0 93.8 91.4 448.4 Total Europe 4,658.3 27.7 167.4 350.6 405.1 429.2 472.2 518.9 578.5 707.6 653.5 663.5 4,974.2 Total PRA Group $ 13,870.0 $ 5,138.0 $ 1,378.8 $ 1,539.6 $ 1,492.0 $ 1,512.6 $ 1,625.2 $ 1,841.2 $ 2,005.6 $ 2,061.9 $ 1,728.9 $ 1,660.4 $ 21,984.2 (1) Non-U.S. amounts are presented using the average exchange rates during the cash collection period.
Frequently Used Terms We may use the following terminology throughout this Form 10-K: • "Buybacks" refers to purchase price refunded by the seller due to the return of ineligible accounts. • "Cash collections" refers to collections on our nonperforming loan portfolios. • "Cash receipts" refers to cash collections on our nonperforming loan portfolios, fees and revenue recognized from our class action claims recovery services. • "Change in expected recoveries" refers to the differences of actual recoveries received when compared to expected recoveries and the net present value of changes in estimated remaining collections. • "Core" accounts or portfolios refer to accounts or portfolios that are nonperforming loans and are not in an insolvent status upon acquisition.
Frequently Used Terms We may use the following terminology throughout this Form 10-K: • "Buybacks" refers to purchase price refunded by the seller due to the return of ineligible nonperforming loan accounts. • "Cash collections" refers to collections on our nonperforming loan portfolios. • "Cash receipts" refers to cash collections on our nonperforming loan portfolios, fees and revenue recognized from our class action claims recovery services. • "Change in expected recoveries" refers to the differences of actual recoveries received when compared to expected recoveries and the net present value of changes in estimated remaining collections. • "Core" accounts or portfolios refer to accounts or portfolios that are nonperforming loans and are not in an insolvent status upon acquisition.
However, management uses certain non-GAAP financial measures, including adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA"), to evaluate our operating and financial performance as well as to set performance goals. We present Adjusted EBITDA because we consider it an important supplemental measure of operations and financial performance.
However, our management uses certain non-GAAP financial measures, including adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA"), to evaluate our operating and financial performance as well as to set performance goals. We present Adjusted EBITDA because we consider 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, as it excludes certain items whose fluctuations from period to period do not necessarily correspond to changes in the operations of our business, and is useful to investors as other companies in the industry report similar financial measures.
Our management believes Adjusted EBITDA helps provide enhanced period to period comparability of operations and financial performance, as it excludes certain items whose fluctuations from period to period do not necessarily correspond to changes in the operations of our business, and is useful to investors as other companies in the industry report similar financial measures.
These estimates include projections of the amount and timing of cash collections we expect to receive from our pools of accounts. We review individual pools for trends, actual performance versus projections and curve shape (a graphical depiction of the amount and timing of cash collections). We then project ERC and then apply a discounted cash flow methodology to our ERC.
These estimates include projections of the amount and timing of cash collections we expect to receive from our pools of accounts. We review individual pools for trends, actual performance versus projections and curve shape (a graphical depiction of the amount and timing of cash collections). We then project ERC and apply a discounted cash flow methodology to our ERC.
While actual results could vary, we believe we have adequate tax accruals with respect to the ultimate outcome of such unresolved tax matters. We record interest and penalties related to unresolved tax matters as a component of income tax expense when the more likely than not standards are met.
While actual results could vary, we believe we have adequate tax accruals with respect to the ultimate outcome of such unresolved tax matters. We record interest and penalties related to unresolved tax matters as a component of income tax expense when the more likely than not standards are not met.
If all or part of the deferred tax assets are determined not to be realizable in the future, we would establish a valuation allowance and charge to earnings the impact in the period such a determination is made.
If all or part of the deferred tax assets are determined not to be realizable in the future, we would establish a valuation allowance and charge the impact to earnings in the period such a determination is made.
These accounts are aggregated separately from insolvency accounts. • "Estimated remaining collections" or "ERC" refers to the sum of all future projected cash collections on our nonperforming loan portfolios. • "Finance receivables" or "receivables" refers to the negative allowance for expected recoveries recorded on our balance sheet as an asset. • "Insolvency" accounts or portfolios refer to accounts or portfolios of nonperforming loans that are in an insolvent status when we purchase them and as such are purchased as a pool of insolvent accounts.
These accounts are aggregated separately from insolvency accounts. • "Estimated remaining collections" or "ERC" refers to the sum of all future projected cash collections on our nonperforming loan portfolios. • "Finance receivables" or "receivables" refers to the negative allowance for expected recoveries recorded on our balance sheet as an asset. 22 • "Insolvency" accounts or portfolios refer to accounts or portfolios of nonperforming loans that are in an insolvent status when we purchase them and as such are purchased as a pool of insolvent accounts.
(4) Other accounts are 480 days or more past due, charged-off and have previously been worked by three or more contingent fee servicers. 32 Non-GAAP Financial Measures We report our financial results in accordance with U.S. generally accepted accounting principles ("GAAP").
(4) Other accounts are 480 days or more past due, charged-off and have previously been worked by three or more contingent fee servicers. Non-GAAP Financial Measures We report our financial results in accordance with U.S. generally accepted accounting principles ("GAAP").
The new share repurchase program has no stated expiration date and does not obligate us to repurchase any specified amount of shares, remains subject to the discretion of our Board of Directors and, subject to compliance with applicable laws, may be modified, suspended or discontinued at any time.
The share repurchase program has no stated expiration date and does not obligate us to repurchase any specified amount of shares, remains subject to the discretion of our Board of Directors and, subject to compliance with applicable laws, may be modified, suspended or discontinued at any time.
If we subsequently realize deferred tax assets that were previously determined to be unrealizable, the respective valuation allowance would be reversed, resulting in a positive adjustment to earnings.
If we subsequently realize deferred tax assets that were previously determined to be unrealizable, the respective valuation allowance would be reversed, resulting in a 40 positive adjustment to earnings.
Specifically, if a Core account files for bankruptcy or insolvency protection after acquisition, we adjust our collection practices to comply with any respective bankruptcy or insolvency rules or policies; however, the account remains in the Core pool.
Specifically, if a Core account files for bankruptcy or insolvency protection after acquisition, we adjust our collection practices to comply with any respective bankruptcy or insolvency rules or policies; however, for accounting purposes, the account remains in the Core pool.
In addition, 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. (4) Non-U.S. amounts are presented at the year-end exchange rate for the respective year of purchase. (5) Non-U.S. amounts are presented at the December 31, 2022 exchange rate.
In addition, 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. (4) Non-U.S. amounts are presented at the year-end exchange rate for the respective year of purchase. (5) Non-U.S. amounts are presented at the December 31, 2023 exchange rate.
In the event an insolvency account is dismissed from its bankruptcy or insolvency status whether voluntarily or involuntarily, we are typically free to pursue alternative collection activities. The purchase price multiple represents our estimate of total cash collections over the original purchase price of the portfolio.
In the event an insolvency account is dismissed from its bankruptcy or insolvency status whether voluntarily or involuntarily, we are typically free to pursue alternative collection activities; however, the account remains in the Insolvency pool. The purchase price multiple represents our estimate of total cash collections over the original purchase price of the portfolio.
These accounts include IVAs, Trust Deeds in the UK, Consumer Proposals in Canada and bankruptcy accounts in the U.S., Canada, Germany and the UK. • "Negative Allowance" refers to the present value of expected cash collections on our finance receivables. • "Portfolio acquisitions" refers to all nonperforming loan portfolios acquired as a result of a purchase, but also includes portfolios added as a result of a business acquisition. 20 • "Portfolio purchases" refers to all nonperforming loan portfolios purchased in the normal course of business and excludes those added as a result of business acquisitions. • "Portfolio income" reflects revenue recorded due to the passage of time using the effective interest rate calculated based on the purchase price of nonperforming loan portfolios and estimated remaining collections. • "Purchase price" refers to the cash paid to a seller to acquire nonperforming loans. • "Purchase price multiple" refers to the total estimated collections on our nonperforming loan portfolios divided by purchase price. • "Recoveries" refers to cash collections plus buybacks and other adjustments. • "Total estimated collections" or "TEC" refers to actual cash collections plus estimated remaining collections on our nonperforming loan portfolios.
These accounts include IVAs, Trust Deeds in the UK, Consumer Proposals in Canada and bankruptcy accounts in the U.S., Canada, Germany and the UK. • "Negative Allowance" refers to the present value of cash flows expected to be collected on our finance receivables. • "Portfolio acquisitions" refers to all nonperforming loan portfolios acquired as a result of a purchase or added as a result of a business acquisition. • "Portfolio purchases" refers to all nonperforming loan portfolios purchased in the normal course of business and excludes those added as a result of business acquisitions. • "Portfolio income" reflects revenue recorded due to the passage of time using the effective interest rate calculated based on the purchase price of nonperforming loan portfolios and estimated remaining collections. • "Purchase price" refers to the cash paid to a seller to acquire nonperforming loans. • "Purchase price multiple" refers to the total estimated collections on our nonperforming loan portfolios divided by purchase price. • "Recoveries" refers to cash collections plus buybacks and other adjustments. • "Total estimated collections" or "TEC" refers to actual cash collections plus estimated remaining collections on our nonperforming loan portfolios.
Year Ended December 31, 2021 Compared To Year Ended December 31, 2020 Refer to Item 7 "Management’s Discussion and Analysis of Financial Condition and Results of Operations" of our 2021 Form 10-K for a discussion of our 2021 results compared to our 2020 results. 24 Supplemental Performance Data Finance Receivables Portfolio Performance We purchase portfolios of nonperforming loans from a variety of credit originators or acquire portfolios through business acquisitions and segregate them into two main portfolio segments: Core or Insolvency, based on the status of the account upon acquisition.
Year Ended December 31, 2022 Compared To Year Ended December 31, 2021 Refer to Item 7 "Management’s Discussion and Analysis of Financial Condition and Results of Operations" of our 2022 Form 10-K for a discussion of our 2022 results compared to our 2021 results. 27 Supplemental Performance Data Finance Receivables Portfolio Performance We purchase portfolios of nonperforming loans from a variety of credit originators or acquire portfolios through strategic acquisitions and segregate them into two main portfolio segments: Core or Insolvency, based on the status of the account upon acquisition.
We believe that funds generated from operations and from cash collections on nonperforming loan portfolios, together with existing cash, available borrowings under our revolving credit facilities, including recent modifications to the terms of those facilities, and access to the capital markets will be sufficient to finance our operations, planned capital expenditures, forward flow purchase commitments, debt maturities and additional portfolio purchases during the next 12 months and beyond.
We believe that funds generated from operations and cash collections on nonperforming loan portfolios, together with existing cash, available borrowings under our revolving credit facilities and access to the capital markets, will be sufficient to finance our operations, planned capital expenditures, forward flow purchase commitments, debt maturities and additional portfolio purchases during the next 12 months and beyond.
Purchase price multiples can vary over time due to a variety of factors, including pricing competition, supply levels, paper type, age of the accounts acquired, mix of portfolios purchased and changes in operational efficiency.
Purchase price multiples can vary over time due to a variety of factors, including pricing competition, supply levels, paper type, age of the accounts acquired, mix of portfolios purchased, costs to collect, expected returns and changes in operational efficiency.
As portfolio pricing becomes more favorable on a relative basis, our profitability will tend to increase. Profitability within given Core portfolio types may also be impacted by the age and quality of the accounts, which impact the cost to collect those accounts.
As portfolio pricing becomes more favorable, our profitability will tend to increase. Profitability within given Core portfolio types may also be impacted by the age and quality of the accounts, which impact the cost to collect those accounts.
We consider accounting estimates to be critical if (1) the accounting estimates made involve a significant level of estimation uncertainty and (2) has had or are reasonably likely to have a material impact on our financial condition or results of operations.
We consider accounting estimates to be critical if they (1) involve a significant level of estimation uncertainty and (2) have had or are reasonably likely to have a material impact on our financial condition or results of operations.
For more information, see Note 6 to our Consolidated Financial Statements included in Item 8 of this Form 10-K. 34 Share Repurchase. On February 25, 2022, we completed our $230.0 million share repurchase program.
For more information, see Note 7 to our Consolidated Financial Statements included in Item 8 of this Form 10-K. Share Repurchases. On February 25, 2022, we completed our $230.0 million share repurchase program.
(2) Includes finance receivables portfolios that were acquired through the acquisition of Aktiv Kapital AS in 2014 (as described in Item 1 of this Form 10-K). (3) Includes the nonperforming loan portfolios that were acquired through our business acquisitions. (4) Non-U.S. amounts are presented at the exchange rate at the end of the year in which the portfolios were purchased.
(2) Includes finance receivables portfolios that were acquired through the acquisition of Aktiv Kapital AS in 2014. (3) Includes the nonperforming loan portfolios that were acquired through our business acquisitions. (4) Non-U.S. amounts are presented at the exchange rate at the end of the year in which the portfolios were purchased.
Net income was adjusted for (i) non-cash items included in net income such as provisions for unrealized gains and losses, changes in expected recoveries, depreciation and amortization, deferred taxes, fair value changes in equity securities and stock-based compensation as well as (ii) changes in the balances of operating assets and liabilities, which can vary significantly in the normal course of business due to the amount and timing of payments.
To calculate net cash provided by/(used in) operating activities, net income/(loss) was adjusted for (i) non-cash items included in net income such as unrealized foreign currency transaction (gains)/losses, changes in expected recoveries, depreciation and amortization, deferred taxes, fair value changes in equity securities, and stock-based compensation, as well as (ii) changes in the balances of operating assets and liabilities, which can vary significantly in the normal course of business due to the amount and timing of payments.
We may seek to access the debt or equity capital markets as we deem appropriate, market permitting. Business acquisitions or higher than expected levels of portfolio purchasing could require additional financing from other sources.
Market conditions permitting, we may seek to access the debt or equity capital markets as we deem appropriate. Business acquisitions or higher than expected levels of portfolio purchasing could require additional financing from other sources. We may also, from time to time, repurchase Senior Notes in the open market or otherwise.
We may also enter into new or renewed forward flow commitments and close on spot transactions in addition to the aforementioned forward flow agreem ents. Borrowings.
We may also enter into new or renewed forward flow commitments and/or close on spot purchase transactions in addition to the current forward flow agreements. Borrowings.
In addition, 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. 28 Estimated Remaining Collections The following chart shows our ERC of $5,699.7 million at December 31, 2022 by geographical region (amounts in millions).
In addition, 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. 31 Estimated Remaining Collections The following chart shows our ERC of $6.4 billion as of December 31, 2023 by geographical region (amounts in millions): The following chart shows our ERC by year and geography as of December 31, 2023 .
Interest-bearing deposits as of December 31, 2022 were $113.0 million. Furthermore, we have the ability to slow the purchase of nonperforming loans if necessary, and use the net cash flow generated from our cash collections from our portfolio of existing nonperforming loans to temporarily service our debt and fund existing operations.
Furthermore, we have the ability to slow the purchase of nonperforming loans if necessary, and use the net cash flow generated from cash collections from our portfolio of existing nonperforming loans to temporarily service our debt and fund existing operations.
As of December 31, 2022, we had $59.4 million in lease liabilities, of which $10.8 million matures within the next 12 months. For more information, see Note 4 to our Consolidated Financial Statements included in Item 8 of this Form 10-K. Derivatives .
As of December 31, 2023, we had $20.4 million of derivative liabilities, $8.8 million of which mature within the next 12 months. The remaining $11.6 million matures in 2028. For more information, see Note 8 to our Consolidated Financial Statements included in Item 8 of this Form 10-K. Investments.
Only) The following table categorizes our quarterly U.S. portfolio acquisitions for the periods indicated into major asset type and delinquency category. Since our inception in 1996, we have acquired more than 60.0 million c ustomer accounts in the U.S. (amounts in thousands). U.S.
Only) The following tables categorize our U.S. portfolio acquisitions for the years indicated by major asset type and delinquency category. Since our inception in 1996, we have acquired more than 62.5 million c ustomer accounts in our U.S. portfolio (amounts in thousands). U.S.
Following the initial years, as we gain collection experience and confidence with a pool of accounts we may begin to adjust our purchase price multiples. Over time, our TEC has often increased as pools have aged resulting in the ratio of ERC to purchase price for any given year of buying to gradually increase.
We follow an established process to evaluate ERC, and we typically do not adjust our ERC and TEC until we gain sufficient collection experience and confidence with a pool of accounts. Over time, our TEC has often increased as pools have aged resulting in the ratio of TEC to purchase price for any given year of buying to gradually increase.
When we pay more for a portfolio, the purchase price multiple and effective interest rates are lower. The opposite tends to occur when we pay less for a portfolio. We incur lower collection costs on certain types of accounts we purchase for which we are able to generally pay more for these types of accounts.
When we pay more for a portfolio, the purchase price multiple and effective interest rates are generally lower. The opposite tends to occur when we pay less for a portfolio.
Depending on the level of performance and expected future impacts from our operations, we may update ERC and TEC levels based on the results of our cash forecasting with the correlating adjustment to the purchase price multiple. We follow an established process to evaluate ERC. During the first years following purchase, we typically do not increase our purchase price multiples.
Depending on the level of performance and expected future impacts from our operations, we may update ERC and TEC levels based on the results of our cash forecasting with a correlating adjustment to the purchase price multiple.
Beyond 12 months our principal payment obligations related to debt maturities occur between one and seven years. Many of our financing arrangements include restrictive covenants with which we must comply. As of December 31, 2022, we determined that we were in compliance with these covenants.
Beyond 12 months, as of December 31, 2023, principal payments on our debt are due from between one and six years. Many of our financing arrangements include covenants with which we must comply, and as of December 31, 2023, we determined that we were in compliance with these covenants.
Also on February 25, 2022, our Board of Directors approved a new share repurchase program under which we are authorized to repurchase up to $150.0 million of our outstanding common stock.
Also on February 25, 2022, our Board of Directors approved a new share repurchase program under which we are authorized to repurchase up to $150.0 million of our outstanding common stock. Repurchases are subject to restrictive covenants contained in 37 our credit facilities and indentures that govern our Senior Notes.
Refer to the Note 13 to our Consolidated Financial Statements included in Item 8 of this Form 10-K for further information related to our income taxes and undistributed international earnings.
Refer to Note 13 to our Consolidated Financial Statements included in Item 8 of this Form 10-K for additional information regarding the unremitted earnings of our international subsidiaries. 36 Borrowings .
Additionally, we evaluate our business using certain ratios that use Adjusted EBITDA, including Debt to Adjusted EBITDA, which is calculated by dividing borrowings by Adjusted EBITDA. The following table reflects our Debt to Adjusted EBITDA at December 31, 2022 and 2021 (amounts in thousands).
Additionally, we evaluate our business using certain ratios that use Adjusted EBITDA, including Debt to Adjusted EBITDA, which is calculated by dividing Borrowings by Adjusted EBITDA.
Additionally, cash collection forecast increases will generally result in more revenue being recognized and cash collection forecast decreases will generally result in less revenue being recognized over the life of the pool.
Generally, adjustments to cash forecasts result in an adjustment to revenue at an amount less than the impact of the performance in the period due to the effects of discounting. Additionally, cash collection forecast increases will result in more revenue being recognized and cash collection forecast decreases in less revenue being recognized over the life of the pool.
Significant changes in our cash flow estimates could result in increased or decreased revenue as we immediately recognize the discounted value of such changes using the constant effective interest rate of the pool.
Adjustments to ERC may include adjustments reflecting recent collection trends, our view of current and future economic conditions, changes in collection assumptions or other timing related adjustments. Significant changes in our cash flow estimates could result in increased or decreased revenue as we immediately recognize the discounted value of such changes using the constant effective interest rate of the pool.
The following table sets forth Consolidated Income Statement amounts as a percentage of total revenues for the periods indicated (dollars in thousands): 2022 2021 2020 Revenues: Portfolio income $ 772,315 79.9 % $ 875,327 79.9 % $ 984,036 92.4 % Changes in expected recoveries 168,904 17.5 197,904 18.1 69,297 6.5 Total portfolio revenue 941,219 97.4 1,073,231 98.0 1,053,333 98.9 Other revenue 25,305 2.6 22,501 2.0 12,081 1.1 Total revenues 966,524 100.0 1,095,732 100.0 1,065,414 100.0 Operating expenses: Compensation and employee services 285,537 29.5 301,981 27.6 295,150 27.7 Legal collection fees 38,450 4.0 47,206 4.3 53,758 5.1 Legal collection costs 76,757 7.9 78,330 7.1 101,635 9.5 Agency fees 63,808 6.6 63,140 5.8 56,418 5.3 Outside fees and services 92,355 9.6 92,615 8.5 84,087 7.9 Communication 39,205 4.1 42,755 3.9 40,801 3.8 Rent and occupancy 18,589 1.9 18,376 1.7 17,973 1.7 Depreciation and amortization 15,243 1.6 15,256 1.4 18,465 1.7 Other operating expenses 50,778 5.2 61,077 5.5 47,426 4.5 Total operating expenses 680,722 70.4 720,736 65.8 715,713 67.2 Income from operations 285,802 29.6 374,996 34.2 349,701 32.8 Other income and (expense): Interest expense, net (130,677) (13.6) (124,143) (11.3) (141,712) (13.2) Foreign exchange gain/(loss), net 985 0.1 (809) (0.1) 2,005 0.2 Other (1,325) (0.1) 282 — (1,049) (0.2) Income before income taxes 154,785 16.0 250,326 22.8 208,945 19.6 Income tax expense 36,787 3.8 54,817 5.0 41,203 3.9 Net income 117,998 12.2 195,509 17.8 167,742 15.7 Adjustment for net income attributable to noncontrolling interests 851 0.1 12,351 1.1 18,403 1.7 Net income attributable to PRA Group, Inc. $ 117,147 12.1 % $ 183,158 16.7 % $ 149,339 14.0 % 22 Year Ended December 31, 2022 Compared With Year Ended December 31, 2021 Cash Collections Cash collections for the years indicated were as follows (amounts in millions): 2022 2021 $ Change % Change Americas and Australia Core $ 946.1 $ 1,206.9 $ (260.8) (21.6) % Americas Insolvency 129.4 147.3 (17.9) (12.2) Europe Core 559.7 614.6 (54.9) (8.9) Europe Insolvency 93.9 92.9 1.0 1.1 Total cash collections $ 1,729.1 $ 2,061.7 $ (332.6) (16.1) % Cash collections adjusted (1) $ 1,729.1 $ 1,986.9 $ (257.8) (13.0) % (1) Cash collections adjusted refers to 2021 cash collections translated using 2022 exchange rates.
Certain prior year amounts have been reclassified for consistency with the current year presentation (fee income is now included within Other revenue on our Consolidated Income Statements). 2023 2022 2021 Revenues: Portfolio income $ 757,128 94.4 % $ 772,315 79.9 % $ 875,327 79.9 % Changes in expected recoveries 29,134 3.6 168,904 17.5 197,904 18.1 Total portfolio revenue 786,262 98.0 941,219 97.4 1,073,231 98.0 Other revenue 16,292 2.0 25,305 2.6 22,501 2.0 Total revenues 802,554 100.0 966,524 100.0 1,095,732 100.0 Operating expenses: Compensation and employee services 288,778 36.0 285,537 29.5 301,981 27.6 Legal collection fees 38,072 4.7 38,450 4.0 47,206 4.3 Legal collection costs 89,131 11.1 76,757 7.9 78,330 7.1 Agency fees 74,699 9.3 63,808 6.6 63,140 5.8 Outside fees and services 82,619 10.3 92,355 9.6 92,615 8.5 Communication 40,430 5.0 39,205 4.1 42,755 3.9 Rent and occupancy 17,319 2.2 18,589 1.9 18,376 1.7 Depreciation and amortization 13,376 1.7 15,243 1.6 15,256 1.4 Impairment of real estate 5,239 0.7 — — — — Other operating expenses 52,399 6.5 50,778 5.2 61,077 5.5 Total operating expenses 702,062 87.5 680,722 70.4 720,736 65.8 Income from operations 100,492 12.5 285,802 29.6 374,996 34.2 Other income and (expense): Interest expense, net (181,724) (22.6) (130,677) (13.6) (124,143) (11.3) Foreign exchange gain/(loss), net 289 — 985 0.1 (809) (0.1) Other (1,944) (0.2) (1,325) (0.1) 282 — Income/(loss) before income taxes (82,887) (10.3) 154,785 16.0 250,326 22.8 Income tax expense/(benefit) (16,133) (2.0) 36,787 3.8 54,817 5.0 Net income/(loss) (66,754) (8.3) 117,998 12.2 195,509 17.8 Adjustment for net income attributable to noncontrolling interests 16,723 2.1 % 851 0.1 % 12,351 1.1 % Net income/(loss) attributable to PRA Group, Inc. $ (83,477) (10.4) % $ 117,147 12.1 % $ 183,158 16.7 % Cash efficiency ratio (1) 58.0% 61.0% 65.3% (1) Calculated by dividing cash receipts less operating expenses by cash receipts. 24 Year Ended December 31, 2023 Compared With Year Ended December 31, 2022 Cash Collections Cash collections for the years indicated were as follows (amounts in millions): 2023 2022 $ Change % Change Americas and Australia Core $ 892.7 $ 946.0 $ (53.3) (5.6) % Americas Insolvency 104.2 129.4 (25.2) (19.5) Europe Core 572.1 559.7 12.4 2.2 Europe Insolvency 91.4 93.9 (2.5) (2.7) Total cash collections $ 1,660.4 $ 1,729.0 $ (68.6) (4.0) % Cash collections adjusted (1) $ 1,660.4 $ 1,732.9 $ (72.5) (4.2) % (1) Cash collections adjusted refers to 2022 foreign currency cash collections remeasured at 2023 average U.S. dollar exchange rates.
This typically results in lower purchase price multiples, while generating similar net income margins when compared with other portfolio purchases. Within a given portfolio type, to the extent that lower purchase price multiples are the result of more competitive pricing, this will generally lead to lower profitability.
Certain types of accounts have lower collection costs, and we generally pay more for these types of accounts, resulting in a lower purchase price multiple but similar net income margins when compared with other portfolio purchases. Within a given portfolio type, when lower purchase price multiples are the result of more competitive pricing, this generally leads to lower profitability.
Reconciliation of Non-GAAP Financial Measures 2022 2021 2020 Net income attributable to PRA Group, Inc. $ 117,147 $ 183,158 $ 149,339 Adjustments: Income tax expense 36,787 54,817 41,203 Foreign exchange (gains)/losses (985) 809 (2,005) Interest expense, net 130,677 124,143 141,712 Other expense/(income) (1) 1,325 (282) 1,049 Depreciation and amortization 15,243 15,256 18,465 Adjustment for net income attributable to noncontrolling interests 851 12,351 18,403 Recoveries applied to negative allowance less Changes in expected recoveries 805,942 988,050 968,362 Adjusted EBITDA $ 1,106,987 $ 1,378,302 $ 1,336,528 (1) Other expense/(income) reflects non-operating related activity.
Adjusted EBITDA is calculated starting with our GAAP financial measure, Net income/(loss) attributable to PRA Group, Inc. and is adjusted for: • income tax expense (or less income tax benefit); • foreign exchange loss (or less foreign exchange gain); • interest expense, net (or less interest income, net); • other expense (or less other income); • depreciation and amortization; • impairment of real estate; • net income attributable to noncontrolling interests; and • recoveries applied to negative allowance less changes in expected recoveries. 35 The following table provides a reconciliation of Net income/(loss) attributable to PRA Group, Inc., as reported in accordance with GAAP, to Adjusted EBITDA for the years indicated (a mounts in thousands): Reconciliation of Non-GAAP Financial Measures 2023 2022 2021 Net income/(loss) attributable to PRA Group, Inc. $ (83,477) $ 117,147 $ 183,158 Adjustments: Income tax expense/(benefit) (16,133) 36,787 54,817 Foreign exchange (gains)/losses (289) (985) 809 Interest expense, net 181,724 130,677 124,143 Other expense/(income) (1) 1,944 1,325 (282) Depreciation and amortization 13,376 15,243 15,256 Impairment of real estate 5,239 — — Adjustment for net income attributable to noncontrolling interests 16,723 851 12,351 Recoveries applied to negative allowance less Changes in expected recoveries 887,891 805,942 988,050 Adjusted EBITDA $ 1,006,998 $ 1,106,987 $ 1,378,302 (1) Other expense/(income) reflects non-operating related activity.
Cash Flows Analysis The following table summarizes our cash flow activity for the years ended December 31, 2022 and 2021 (amounts in thousands): 2022 2021 Change Total cash provided by (used in): Operating activities $ 21,592 $ 84,925 $ (63,333) Investing activities 120,453 160,376 (39,923) Financing activities (121,342) (262,812) 141,470 Effect of exchange rate on cash (25,017) (14,464) (10,553) Net decrease in cash and cash equivalents $ (4,314) $ (31,975) $ 27,661 Operating Activities Cash provided by operating activities mainly reflects cash collections recognized as revenue partially offset by cash paid for operating expenses, interest and income taxes.
Cash Flow Analysis The following table summarizes our cash flow activity for the years ended December 31, 2023 and 2022 (amounts in thousands): 2023 2022 Change Net cash provided by/(used in): Operating activities $ (97,535) $ 21,592 $ (119,127) Investing activities (234,860) 120,453 (355,313) Financing activities 355,300 (121,342) 476,642 Effect of exchange rates on cash 6,029 (25,017) 31,046 Net decrease in cash and cash equivalents $ 28,934 $ (4,314) $ 33,248 Operating Activities Net cash provided by/(used in) operating activities mainly reflects cash collections recognized as revenue and cash paid for operating expenses, interest and income taxes.
For the year ended December 31, 2022 we had: • Total portfolio purchases of $850.0 million. • Total cash collections of $1.7 billion. • Estimated remaining collections ("ERC") of $5.7 billion. • Cash efficiency ratio of 61.0%. • Diluted earnings per share of $2.94.
Our primary business is the purchase, collection and management of portfolios of nonperforming loans. For the year ended December 31, 2023 we had: • Total portfolio purchases of $1.2 billion. • Total cash collections of $1.7 billion. • Cash efficiency ratio of 58.0%. • Diluted earnings per share of $(2.13).
Cash collections were $1,729.1 million in 2022, a decrease of $332.6 million, or 16.1%, compared to $2,061.7 million in 2021.
Cash collections were $1.66 billion in 2023, a decrease of $68.6 million, or 4.0%, compared to $1.73 billion in 2022.
Legal Collection Costs Legal collection costs primarily consist of costs paid to courts where a lawsuit is filed for the purpose of attempting to collect on an account. Legal collection costs were $76.8 million in 2022, compared to $78.3 million in 2021. Agency Fees Agency fees primarily represent third-party collection fees.
Legal collection costs primarily consist of costs paid to courts where a lawsuit is filed for the purpose of attempting to collect on an account. The increase primarily reflects higher volumes of lawsuits filed in the U.S. during 2023.
Debt to Adjusted EBITDA 2022 2021 Borrowings $ 2,494,858 $ 2,608,714 Adjusted EBITDA 1,106,987 1,378,302 Debt to Adjusted EBITDA 2.25 x 1.89 x 33 Liquidity and Capital Resources We actively manage our liquidity to help provide access to sufficient funding to meet our business needs and financial obligations. Sources of Liquidity Cash and cash equivalents .
The following table displays our Debt to Adjusted EBITDA ratio as of December 31, 2023 and 2022 (dollars in thousands): Debt to Adjusted EBITDA 2023 2022 Borrowings $ 2,914,270 $ 2,494,858 Adjusted EBITDA 1,006,998 1,106,987 Debt to Adjusted EBITDA 2.89 x 2.25 x Liquidity and Capital Resources We actively manage our liquidity to meet our business needs and financial obligations.
Revenues Revenue generation for the years indicated were as follows (amounts in thousands): 2022 2021 $ Change % Change Portfolio income $ 772,315 $ 875,327 $ (103,012) (11.8) % Changes in expected recoveries 168,904 197,904 (29,000) (14.7) Total portfolio revenue 941,219 1,073,231 (132,012) (12.3) Other revenue 25,305 22,501 2,804 12.5 Total revenues $ 966,524 $ 1,095,732 $ (129,208) (11.8) % Total Portfolio Revenue Total portfolio revenue was $941.2 million in 2022, a decrease of $132.0 million, or 12.3%, compared to $1,073.2 million in 2021.
Revenues Revenues for the years indicated were as follows (amounts in thousands): 2023 2022 $ Change % Change Portfolio income $ 757,128 $ 772,315 $ (15,187) (2.0) % Changes in expected recoveries 29,134 168,904 (139,770) (82.8) Total portfolio revenue 786,262 941,219 (154,957) (16.5) Other revenue 16,292 25,305 (9,013) (35.6) Total revenues $ 802,554 $ 966,524 $ (163,970) (17.0) % Total Portfolio Revenue Total portfolio revenue was $786.3 million in 2023, a decrease of $154.9 million, or 16.5%, compared to $941.2 million in 2022.
Interest Expense, Net Interest expense, net f or the years indicated were as follows (amounts in thousands): 2022 2021 $ Change % Change Interest on debt obligations and unused line fees $ 71,108 $ 76,759 $ (5,651) (7.4) % Interest on senior notes 39,625 26,889 12,736 47.4 Coupon interest on convertible notes 12,075 12,075 — — Amortization of loan fees and other loan costs 10,097 9,508 589 6.2 Interest income (2,228) (1,088) (1,140) 104.8 Interest expense, net $ 130,677 $ 124,143 $ 6,534 5.3 % Interest expense, n et was $130.7 million in 2022, an increase of $6.5 million, or 5.3%, compared to $124.1 million in 2021 p rimarily due to higher interest rates.
Interest expense, net f or the years indicated was as follows (amounts in thousands): 2023 2022 $ Change % Change Interest on revolving credit facilities and term loan, and unused line fees $ 110,684 $ 71,108 $ 39,576 55.7 % Interest on senior notes 69,728 39,625 30,103 76.0 Interest on convertible notes 5,032 12,075 (7,043) (58.3) Amortization of loan fees and other loan costs 9,223 10,097 (874) (8.7) Interest income (12,943) (2,228) (10,715) 480.9 Interest expense, net $ 181,724 $ 130,677 $ 51,047 39.1 % Income Tax Expense/(Benefit) Income tax benefit was $16.1 million in 2023 compared to income tax expense of $36.8 million in 2022.
For more information, see Note 9 to our Consolidated Financial Statements included in Item 8 of this Form 10-K.
For more information, see Note 5 to our Consolidated Financial Statements included in Item 8 of this Form 10-K. Derivatives . We enter into d erivative financial instruments to reduce our exposure to fluctuations in interest rates on variable rate debt and foreign currency exchange rates.
Income Tax Expense Income tax expense was $36.8 million in 2022, a decrease of $18.0 million, or 32.8%, compared to $54.8 million in 2021. In 2022, our effective tax rate was 23.8% compared to 21.9% in 2021. The decrease in income tax expense was primarily due to lower income before income taxes, which decreased $95.5 million, or 38.2%.
The change in income tax expense/(benefit) was primarily due to the loss before income taxes in 2023 compared to income before income taxes in 2022. In 2023, our effective tax benefit rate was 19.5%, compared to an effective tax rate of 23.8% in 2022.
We used the remainder of the net proceeds from the offering to repay a portion of our outstanding borrowings under our North American revolving credit facility. Interest-bearing deposits . Per the terms of our European credit facility, we are permitted to obtain interest-bearing deposit funding of up to SEK 1.2 billion (approximately $115.0 million as of December 31, 2022).
We used the remainder of the net proceeds to repay a portion of the outstanding borrowings under the domestic revolving credit facility under our North America Credit Agreement. Interest-bearing deposits .
As of December 31, 2022, we have forward flow commitments in place for the purchase of nonperforming loans with a maximum purchase price of $792.2 million, of which $722.9 million is due within the next 12 months. The $792.2 million includes $461.1 million for the Americas and Australia and $331.1 million for Europe.
As of December 31, 2023, we have forward flow agreements in place with an estimated purchase price of approximately $550.0 million over the next 12 months. This total is comprised of $400.0 million for the Americas and Australia and $150.0 million for Europe.
The increase was prima rily attributable to settlement timing in our claims processing company, CCB. Operating Expenses Total operating expenses were $680.7 million in 2022, a decrease of $40.0 million, or 5.6%, compared to $720.7 million in 2021.
The decrease was primarily due to the timing of settlements in CCB. Operating Expenses Total operating expenses were $702.1 million in 2023, an increase of $21.4 million, or 3.1%, compared to $680.7 million in 2022.
During the year ended December 31, 2022, we repurchased 2,331,364 shares of our common stock for approximately $99.4 million. As of December 31, 2022, we had $67.7 million remaining for share repurchases under the new program. Leases. The majority of our leases have remaining lease terms of one to 14 years.
As of December 31, 2023, we had $67.7 million remaining for share repurchases under the program. Leases. Our leases have remaining lease terms from one to 12 years. As of December 31, 2023, we had $50.3 million in lease liabilities, of which $10.0 million is due within the next 12 months.
Due to all the factors described above, readers should be cautious when making comparisons of purchase price multiples among periods and between types of categories of portfolio segments and related geographies. 25 Purchase Price Multiples as of December 31, 2022 Amounts in thousands Purchase Period Purchase Price (2)(3) Total Estimated Collections (4) Estimated Remaining Collections (5) Current Purchase Price Multiple Original Purchase Price Multiple (6) Americas and Australia Core 1996-2012 $ 1,541,897 $ 4,798,281 $ 42,398 311% 238% 2013 390,826 905,829 17,025 232% 211% 2014 404,117 872,066 26,384 216% 204% 2015 443,114 905,285 55,162 204% 205% 2016 455,767 1,081,751 93,292 237% 201% 2017 532,851 1,208,081 156,253 227% 193% 2018 653,975 1,464,612 225,935 224% 202% 2019 581,476 1,294,519 288,207 223% 206% 2020 435,668 948,088 337,470 218% 213% 2021 435,846 811,328 553,876 186% 191% 2022 406,082 726,523 659,290 179% 179% Subtotal 6,281,619 15,016,363 2,455,292 Americas Insolvency 1996-2012 1,038,222 2,146,283 285 207% 165% 2013 227,834 355,578 142 156% 133% 2014 148,420 218,674 392 147% 124% 2015 63,170 87,891 279 139% 125% 2016 91,442 117,449 612 128% 123% 2017 275,257 355,272 4,406 129% 125% 2018 97,879 137,315 16,401 140% 127% 2019 123,077 168,002 46,299 137% 128% 2020 62,130 89,698 46,704 144% 136% 2021 55,187 72,934 50,407 132% 136% 2022 33,442 46,651 43,464 139% 139% Subtotal 2,216,060 3,795,747 209,391 Total Americas and Australia 8,497,679 18,812,110 2,664,683 Europe Core 2012 20,409 43,718 — 214% 187% 2013 20,334 26,909 — 132% 119% 2014 (1) 773,811 2,365,317 406,593 306% 208% 2015 411,340 728,250 153,190 177% 160% 2016 333,090 567,637 189,769 170% 167% 2017 252,174 358,816 119,854 142% 144% 2018 341,775 540,246 220,787 158% 148% 2019 518,610 798,429 373,658 154% 152% 2020 324,119 557,983 305,148 172% 172% 2021 412,411 699,520 498,755 170% 170% 2022 359,447 660,999 546,522 184% 184% Subtotal 3,767,520 7,347,824 2,814,276 Europe Insolvency 2014 (1) 10,876 18,611 — 171% 129% 2015 18,973 28,950 125 153% 139% 2016 39,338 56,990 1,500 145% 130% 2017 39,235 50,905 4,673 130% 128% 2018 44,908 52,582 11,526 117% 123% 2019 77,218 110,515 35,296 143% 130% 2020 105,440 153,006 66,106 145% 129% 2021 53,230 71,526 45,007 134% 134% 2022 44,604 61,057 56,551 137% 137% Subtotal 433,822 604,142 220,784 Total Europe 4,201,342 7,951,966 3,035,060 Total PRA Group $ 12,699,021 $ 26,764,076 $ 5,699,743 (1) Includes finance receivables portfolios that were acquired through the acquisition of Aktiv Kapital AS in 2014 (as described in Item 1 of this Form 10-K).
Due to all of the factors described above, readers should be cautious when making comparisons of purchase price multiples among periods and between types of categories of portfolio segments and related geographies. 28 Purchase Price Multiples as of December 31, 2023 Amounts in thousands Purchase Period Purchase Price (2)(3) Total Estimated Collections (4) Estimated Remaining Collections (5) Current Purchase Price Multiple Original Purchase Price Multiple (6) Americas and Australia Core 1996-2013 $ 1,932,722 $ 5,725,248 $ 52,146 296% 233% 2014 404,117 884,911 27,461 219% 204% 2015 443,114 899,839 35,758 203% 205% 2016 455,767 1,078,122 65,679 237% 201% 2017 532,851 1,200,599 105,245 225% 193% 2018 653,975 1,482,269 152,931 227% 202% 2019 581,476 1,294,462 182,487 223% 206% 2020 435,668 951,929 216,016 218% 213% 2021 435,846 749,966 362,191 172% 191% 2022 406,082 708,070 460,475 174% 179% 2023 622,583 1,227,985 1,118,683 197% 197% Subtotal 6,904,201 16,203,400 2,779,072 Americas Insolvency 1996-2013 1,266,056 2,502,614 91 198% 159% 2014 148,420 218,811 98 147% 124% 2015 63,170 88,009 73 139% 125% 2016 91,442 117,987 256 129% 123% 2017 275,257 356,839 1,121 130% 125% 2018 97,879 135,530 1,939 138% 127% 2019 123,077 168,658 18,261 137% 128% 2020 62,130 90,690 28,225 146% 136% 2021 55,187 73,803 33,804 134% 136% 2022 33,442 46,811 34,461 140% 139% 2023 91,282 122,780 113,508 135% 135% Subtotal 2,307,342 3,922,532 231,837 Total Americas and Australia 9,211,543 20,125,932 3,010,909 Europe Core 2012-2013 40,742 71,982 1 177% 153% 2014 (1) 773,811 2,465,052 394,133 319% 208% 2015 411,340 743,591 141,158 181% 160% 2016 333,090 567,702 162,940 170% 167% 2017 252,174 363,813 107,971 144% 144% 2018 341,775 544,970 194,808 159% 148% 2019 518,610 838,326 353,219 162% 152% 2020 324,119 561,192 262,884 173% 172% 2021 412,411 695,544 428,779 169% 170% 2022 359,447 582,380 489,333 162% 162% 2023 410,593 692,580 640,924 169% 169% Subtotal 4,178,112 8,127,132 3,176,150 Europe Insolvency 2014 (1) 10,876 18,882 — 174% 129% 2015 18,973 29,301 29 154% 139% 2016 39,338 57,673 932 147% 130% 2017 39,235 51,995 2,020 133% 128% 2018 44,908 52,658 4,862 117% 123% 2019 77,218 112,260 20,970 145% 130% 2020 105,440 156,670 42,614 149% 129% 2021 53,230 72,736 33,441 137% 134% 2022 44,604 60,935 46,620 137% 137% 2023 46,558 64,411 60,029 138% 138% Subtotal 480,380 677,521 211,517 Total Europe 4,658,492 8,804,653 3,387,667 Total PRA Group $ 13,870,035 $ 28,930,585 $ 6,398,576 (1) Includes finance receivables portfolios that were acquired through the acquisition of Aktiv Kapital AS in 2014.
As of December 31, 2022, cash and cash equivalents totaled $83.4 million, of which $75.3 million consisted of cash on hand related to international operations with indefinitely reinvested earnings. See the "Undistributed Earnings of International Subsidiaries" section below for more information. Borrowings .
Sources of Liquidity Cash and cash equivalents . As of December 31, 2023, cash and cash equivalents totaled $112.5 million, of which $76.5 million related to our international operations with indefinitely reinvested earnings.
Agency fees were $63.8 million in 2022, compared to $63.1 million in 2021. Communication Communication expenses primarily represent postage and telephone related expenses incurred as a result of our collection efforts. Communication expenses were $39.2 million in 2022, a decrease of $3.6 million, or 8.4%, compared to $42.8 million in 2021.
Outside Fees and Services Outside fees and services expenses were $82.6 million in 2023, a decrease of $9.8 million, or 10.6%, compared to $92.4 million in 2022. The decrease reflects lower litigation costs and consulting fees. Communication Communication expenses were $40.4 million in 2023, an increase of $1.2 million, or 3.1%, compared to $39.2 million in 2022.
Executive Overview We are a global financial and business services company with operations in the Americas, Europe and Australia. Our primary business is the purchase, collection and management of portfolios of nonperforming loans.
It should be read in conjunction with the financial statements and notes thereto included in Item 8 of this Form 10-K. Executive Overview We are a global financial and business services company with operations based primarily in the Americas and Europe, and to a lesser extent, Australia.
Of our $2.5 billion of borrowings at December 31, 2022, estimated interest, unused fees and principal payments for the next 12 months are approximately $489.7 million, of which, $345.0 million relates to principal payment due on our 2023 Convertible Notes, which, as discussed above, we will retire using the funds from the offering of our 2028 Notes that we deposited in the segregated deposit account.
Of our $2.9 billion in borrowings as of December 31, 2023, estimated interest, unused fees and principal payments for the next 12 months ar e $202.4 million, of which $12.5 million r elates to principal on the term loan under our North American Credit Agreement.
Compensation and Employee Services Compensation and employee service expenses were $285.5 million in 2022, a decrease of $16.5 million, or 5.5%, compared to $302.0 million in 2021. The decrease was primarily attributable to lower levels of compensation accruals and a decrease in collector compensation expenses in the U.S. call centers.
Compensation and Employee Services Compensation and employee service expenses were $288.8 million in 2023, an increase of $3.3 million, or 1.2%, compared to $285.5 million in 2022.
For example, we invested $850.0 million in portfolio acquisitions in 2022. The portfolios acquired in 2022 generated $109.4 million of cash collections, representing only 6.3% of 2022 cash collections. Uses of Liquidity and Material Cash Requirements Forward Flows. Contractual obligations over the next year are primarily related to purchase commitments.
We invested $1.2 billion in portfolio acquisitions in 2023, which generated $171.9 million of cash collections, representing 10.4% of our total 2023 cash collections. Uses of Liquidity and Material Cash Requirements Forward Flows. We enter into forward flow agreements for the purchase of nonperforming loans.
The decrease was largely due to a decrease of $229.5 million, or 30.6%, in cash collections in U.S. call center and other collections, which we believe was mainly due to higher collections driven by excess consumer liquidity during 2021 coupled with lower levels of portfolio purchasing.
The decrease was primarily due to a decline of $159.4 million, or 16.9%, in U.S. collections, largely due to the impact of lower purchasing levels in the years leading up to 2023 with higher levels of consumer liquidity driving a lower supply of nonperforming loan portfolios.
Total full-time equivalents decreased 4.9% to 3,277 as of December 31, 2022 from 3,446 as of December 31, 2021 mainly reflecting natural attrition. 23 Legal Collection Fees Legal collection fees represent contingent fees incurred for the cash collections generated by our independent third-party attorney network.
Legal collection fees represent contingent fees incurred for the cash collections generated by our third-party attorney network. Legal Collection Costs Legal collection costs were $89.1 million in 2023, an increase of $12.3 million, or 16.0%, compared to $76.8 million in 2022.
Net cash provided by operating activities decreased $63.3 million during the year ended December 31, 2022, mainly driven by lower cash collections recognized as portfolio income, lower cash paid for income taxes, and the impact of foreign exchange. Investing Activities Cash provided by investing activities mainly reflects recoveries applied to our negative allowance.
The change was primarily driven by lower cash collections recognized as income, higher cash paid for interest and the impact of unrealized foreign currency transaction (gains)/losses. 38 Investing Activities Net cash used in investing activities increased by $355.3 million in 2023, primarily driven by an increase of $316.0 million in purchases of nonperforming loan portfolios and a decrease of $57.8 million in recoveries applied to the negative allowance.
Legal collection fees were $38.4 million in 2022, a decrease of $8.8 million, or 18.6%, compared to $47.2 million in 2021. The decrease was mainly due to lower external legal cash collections in the U.S.
Agency Fees Agency fees were $74.7 million in 2023, an increase of $10.9 million, or 17.1%, compared to $63.8 million in 2022. Agency fees primarily represent third-party collection fees. The increase was mainly due to the increase in cash collections in Brazil.
The following table provides a reconciliation of net income attributable to PRA Group, Inc., as reported in accordance with GAAP, to Adjusted EBITDA for the years ended December 31, 2022, 2021 and 2020 (amounts in thousands).
Unless otherwise specified, references to 2023, 2022 and 2021 are for the years ended December 31, 2023, December 31, 2022 and December 31, 2021, respectively. 23 Results of Operations The following table sets forth Consolidated Income Statement amounts as a percentage of total revenues for the periods indicated (dollars in thousands).
The decrease was primarily driven by lower levels of portfolio purchasing, lower levels of cash overperformance, and the impact of foreign exchange. These decreases were partially offset by an increase to our forecasted ERC in certain pools. Other Revenue Other revenue was $25.3 million in 2022 , an increase of $2.8 million, or 12.5%, compared to $22.5 million in 2021.
This was primarily due to the decrease in changes in expected recoveries, which was largely driven by lower levels of cash overperformance and a net increase to the ERC of certain pools during 2022 compared to a net decrease during 2023.
Removed
It should be read in conjunction with the financial statements and notes thereto included in Item 8 of this Form 10-K. Additionally, this discussion includes material events and uncertainties known to management that are reasonably likely to cause reported financial information not to be indicative of our future operating results or of our future financial condition.
Added
As of December 31, 2023, we had estimated remaining collections ("ERC") of $6.4 billion. In the U.S., in 2023, portfolio supply and pricing dynamics improved, and we expect them to remain healthy in 2024.
Removed
Leading financial industry publications have indicated that excess consumer liquidity has resulted in lower levels of charge offs across most lending institutions, primarily in the U.S. As a result, this has caused a decrease in the supply of portfolios available for purchase in the U.S. during 2021 and 2022 resulting in a lower level of portfolio purchases and pricing pressures.
Added
There is a positive correlation between industry credit card charge-off rates and our U.S. portfolio purchases, and in 2023, we benefited from significant growth in portfolio supply within the U.S. Additionally, we are evaluating and implementing a number of strategic and operational initiatives in our U.S. business designed to improve profitability by increasing cash collections while reducing our marginal costs.
Removed
We expect these trends to continue temporarily; however, consistent with our experience during previous economic cycles, we believe charge offs will increase. This should lead to a greater level of supply, which we anticipate could occur in the coming months.
Added
These initiatives include customer contact strategies and legal collection processes. In Brazil, we benefited from higher recent purchasing levels, which generated a significant increase in cash collections during 2023. The European debt sale market remains competitive. While credit normalization in Europe has been slower than the U.S., like the U.S., Europe has seen improved portfolio pricing.
Removed
Furthermore, the combination of robust demand for goods and services and lingering supply chain constraints continue to contribute to elevated levels of inflation, rising interest rates, foreign exchange rate fluctuations, and concerns of global recession. We cannot predict the full extent to which these items will impact our business, results of operations and financial condition.
Added
While we believe the cost of living in certain European markets, including the UK, has put pressure on consumers, resulting in fewer large one-time payments, the proportion of customers paying us has remained stable. In 2023, net loss attributable to PRA Group of $83.5 million reflected a decrease from net income attributable to PRA Group of $117.1 million in 2022.
Removed
Unless otherwise specified, references to 2022, 2021 and 2020 are for the years ended December 31, 2022, December 31, 2021 and December 31, 2020, respectively. 21 Results of Operations The results of operations include the financial results of the Company and all of our subsidiaries. Certain prior year amounts have been reclassified for consistency with the current year presentation.
Added
Total portfolio revenue in 2023 was $786.3 million compared to $941.2 million in 2022, a decrease of $154.9 million. Total operating expenses increased from $680.7 million in 2022 to $702.1 million in 2023. Interest expense, net increased from $130.7 million in 2022 to $181.7 million in 2023, an increase of $51.0 million.
Removed
Fee Income is now included within Other revenue on our Consolidated Income Statements.
Added
Due to our net loss in 2023, we recorded an income tax benefit of $16.1 million in 2023 compared to income tax expense of $36.8 million in 2022.
Removed
Additionally, U.S. legal cash collections decreased $41.2 million, or 12.3%, mainly reflecting the impact from the lower volume of accounts placed in the legal channel in the last few years.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

11 edited+2 added−5 removed2 unchanged
Biggest changeCurrency Exchange Risk We operate internationally and enter into transactions denominated in various foreign currencies. In 2022, we generated $445.8 million of revenues from operations outside the U.S. and use d 12 fu nctional currencies, excluding the U.S. dollar. Weakness in one particular currency might be offset by strength in other currencies over time.
Biggest changeIn 2023, we generated $444.3 million of revenues from operations outside the U.S. and used multiple functional currencies. Weakness in one particular currency might be offset by strength in other currencies over time. Fluctuations in foreign currencies could cause us to incur foreign currency exchange gains and losses, and could adversely affect our comprehensive income and stockholders' equity.
Foreign currency translation adjustments are included as a component of Other comprehensive (loss)/income in our Consolidated Statements of Comprehensive Income and as a component of equity in our Consolidated Balance Sheets. We have taken measures to mitigate the impact of foreign currency fluctuations.
Foreign currency translation adjustments are included as a component of Other comprehensive income/(loss) in our Consolidated Statements of Comprehensive Income and as a component of Equity in our Consolidated Balance Sheets. We have taken measures to mitigate the impact of foreign currency fluctuations.
We have organized our European operations so that portfolio ownership and collections generally occur within the same entity. Our European and UK credit facilities are multi-currency facilities, allowing us to better match funding and portfolio acquisitions by currency. We actively monitor the value of our finance receivables by currency.
We have organized our European operations so that portfolio ownership and collections generally occur within the same entity. Additionally, our European and UK credit facilities are multi-currency facilities, allowing us to better match funding and portfolio acquisitions by currency. We actively monitor the value of our finance receivables by currency.
In the event adjustments are required to our liability composition by currency we may, from time to time, execute re-balancing foreign exchange contracts to more closely align funding and portfolio acquisitions by currency. 38
In the event adjustments are required to our liability composition by currency we may, from time to time, execute re-balancing foreign exchange contracts to more closely align funding and portfolio acquisitions by currency. 41
We do not believe that we currently face a significant risk of loss in the event of non-performance by the counterparties associated with these instruments as these transactions were executed with a diversified group of major financial institutions with an investment-grade credit rating.
We do not believe that we currently face a significant risk of loss in the event of non-performance by the counterparties to these instruments, as these transactions were executed with a diversified group of major financial institutions with investment-grade credit ratings.
Our intention is to spread our counterparty credit risk across a number of counterparties so that exposure to a single counterparty is minimized. Interest Rate Risk We are subject to interest rate risk from outstanding borrowings on our variable rate credit facilities.
Our intention is to spread our counterparty credit risk across a number of counterparties so that exposure to a single counterparty is mitigated. Interest Rate Risk We are subject to interest rate risk from borrowings on our variable rate credit facilities, as well as our interest-bearing deposits.
As such, our consolidated financial results are subject to fluctuations due to changes in the market rate of interest. We assess this interest rate risk by estimating the increase or decrease in interest expense that would occur due to a change in short-term interest rates.
As such, our consolidated financial results are subject to fluctuations due to changes in market interest rates. We assess this interest rate risk by estimating the increase or decrease in interest expense that would occur due to a change in short-term interest rates. The borrowings on our variable rate credit facilities were $1.9 billion as of December 31, 2023.
Foreign currency gains and losses are primarily the result of the re-measurement of transactions in certain other currencies into an entity's functional currency. Foreign currency gains and losses are included as a component of Other income and (expense) in our Consolidated Income Statements.
Additionally, our reported financial results could change from period to period due solely to fluctuations between currencies. Foreign currency gains and losses are primarily the result of the re-measurement of transactions in other currencies into an entity's functional currency. Foreign currency gains and losses are included as a component of Other income and (expense) in our Consolidated Income Statements.
To reduce the exposure to changes in the market rate of interest and to be in compliance with the terms of our European and our UK revolving credit facilities, we have entered into interest rate derivative contracts for a portion of our borrowings under our floating rate financing arrangements.
To reduce the exposure to changes in the market rate of interest, we have entered into interest rate derivative contracts for a portion of our borrowings under our floating rate financing arrangements. The terms of the interest rate derivative contracts require us to receive a variable interest rate and pay a fixed interest rate.
The borrowings on our variable rate credit facilities were approximately $1.5 billion as of December 31, 2022. Based on our current debt structure at December 31, 2022, assuming a 50 basis point decrease in interest rates, for example, interest expense over the following 12 months would decrease by an estimated $4.6 million.
Based on our debt structure as of December 31, 2023, assuming a 50 basis point decrease in interest rates, interest expense over the following 12 months would decrease by an estimated $5.7 million. Assuming a 50 basis point increase in interest rates, interest expense over the following 12 months would increase by an estimated $5.7 million.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Our activities are subject to various financial risks including market risk, currency and interest rate risk, credit risk, liquidity risk and cash flow risk. Our financial risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on our financial performance.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Our business is subject to various financial risks, including market, currency, interest rate, credit, liquidity and cash flow risk. We use various strategies, including derivative financial instruments, to manage these risks; however, they may still impact our Consolidated Financial Statements.
Removed
We may periodically enter into derivative financial instruments, typically interest rate and currency derivatives, to reduce our exposure to fluctuations in interest rates on variable-rate debt, fluctuations in currency rates and their impact on earnings and cash flows.
Added
Of our $2.9 billion in total borrowings as of December 31, 2023, $1.0 billion was fixed rate debt.
Removed
Assuming a 50 basis point increase in interest rates, interest expense over the following 12 months would increase by an estimated $4.6 million.
Added
Considering these fixed rate borrowings and interest rate hedges on our variable rate debt, with maturities that range from one month to five years, as of December 31, 2023, 63% of our total debt was either fixed rate or converted to a fixed rate. Currency Exchange Risk We operate internationally and enter into transactions denominated in various foreign currencies.
Removed
As of December 31, 2022, we are 65% hedged on a notional basis. We apply hedge accounting to certain of our interest rate derivative contracts. By applying hedge accounting, changes in market value are reflected as adjustments in Other comprehensive (loss)/income. All derivatives to which we have applied hedge accounting were evaluated and remained highly effective at December 31, 2022.
Removed
Terms of the interest rate derivative contracts require us to 37 receive a variable interest rate and pay a fixed interest rate. The sensitivity calculations above consider the impact of our interest rate derivative contracts and zero interest rate floors on revolving loans under our North America, UK and European credit facilities.
Removed
As a result of our international operations, fluctuations in foreign currencies could cause us to incur foreign currency exchange gains and losses, and could adversely affect our comprehensive income and stockholders' equity. Additionally, our reported financial results could change from period to period due solely to fluctuations between currencies.

Other PRAA 10-K year-over-year comparisons