UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
ý☒Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended SeptemberJune 30, 20172023
¨ ☐Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from ________ to ________
Commission File Number: 000-50058
PRA Group, Inc.
(Exact name of registrant as specified in its charter)
Delaware75-3078675
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
120 Corporate Boulevard, Norfolk, Virginia23502(888) 772-7326
(Address of principal executive offices)(Zip Code)(Registrant's Telephone No., including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)



120 Corporate Boulevard
Norfolk, Virginia 23502
(Address of principal executive offices)

(888) 772-7326
(Registrant's Telephone No., including area code)

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par value per sharePRAANASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES  Yes  þ   NO     No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES  Yes  þ   NO     No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer  þ   Accelerated filer  ¨   Non-accelerated filer  ¨   Smaller reporting company  ¨ ☐Emerging growth company  ¨☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to h Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES  ¨   NO  Yes  ☐   No  þ

The number of shares of the registrant's common stock outstanding as of November 3, 2017 was 45,169,039.July 31, 2023 was 39,241,605.



Table of Contents


Part I. Financial Information
Item 1.
3
Consolidated Balance Sheets
3
Consolidated Income Statements
4
Consolidated Statements of Comprehensive Income/(Loss)Income
5
Consolidated StatementStatements of Changes in Equity
6
Consolidated Statements of Cash Flows
78
Notes to Consolidated Financial Statements
89
1. Organization and Business
89
2. Finance Receivables, net
910
3. Investments
1015
4. BorrowingsGoodwill
1116
5. Goodwill and Intangible Assets, netLeases
1416
6. Income TaxesBorrowings
1517
7. Derivatives
21
8. Fair Value
22
9. Accumulated Other Comprehensive Loss
24
10. Earnings per Share
1625
8.11. Income Taxes
26
12. Commitments and Contingencies
1626
9. Fair Value13. Recently Issued Accounting Standards
1827
10. Recent Accounting Pronouncements
20
Item 2.
22
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
2328
Item 3.
4449
Item 4.
4550
Item 1.
4651
Item 1A.
4651
Item 2.
4651
Item 3.
4651
Item 4.
4651
Item 5.
4651
Item 6.
4651
Signatures
4753

2


Part I. Financial Information
Item 1. Financial Statements (Unaudited)
PRA Group, Inc.
Consolidated Balance Sheets
SeptemberJune 30, 20172023 and December 31, 20162022
(Amounts in thousands)
(unaudited)  (unaudited)
September 30,
2017		 December 31,
2016		June 30,
2023		December 31,
2022
Assets   Assets
Cash and cash equivalents$113,754
 $94,287
Cash and cash equivalents$111,375 $83,376 
Investments75,512
 68,543
Investments76,169 79,948 
Finance receivables, net2,577,831
 2,307,969
Finance receivables, net3,424,548 3,295,008 
Other receivables, net10,919
 11,650
Income taxes receivable3,877
 9,427
Income taxes receivable36,327 31,774 
Net deferred tax asset41,183
 28,482
Deferred tax assets, netDeferred tax assets, net56,758 56,908 
Right-of-use assetsRight-of-use assets51,135 54,506 
Property and equipment, net36,428
 38,744
Property and equipment, net45,874 51,645 
Goodwill538,337
 499,911
Goodwill414,905 435,921 
Intangible assets, net25,527
 27,935
Other assets37,409
 33,808
Other assets103,768 86,588 
Assets held for sale—
 43,243
Total assets$3,460,777
 $3,163,999
Total assets$4,320,859 $4,175,674 
Liabilities and Equity   Liabilities and Equity
Liabilities:   Liabilities:
Accounts payable$3,605
 $2,459
Accounts payable$6,345 $7,329 
Accrued expenses82,445
 82,699
Accrued expenses118,877 111,395 
Income taxes payable4,069
 19,631
Income taxes payable18,658 25,693 
Net deferred tax liability237,044
 258,344
Deferred tax liabilities, netDeferred tax liabilities, net18,463 42,918 
Lease liabilitiesLease liabilities55,723 59,384 
Interest-bearing deposits96,395
 76,113
Interest-bearing deposits99,318 112,992 
Borrowings1,963,504
 1,784,101
Borrowings2,739,667 2,494,858 
Other liabilities1,213
 10,821
Other liabilities24,134 34,355 
Liabilities held for sale—
 4,220
Total liabilities2,388,275
 2,238,388
Total liabilities3,081,185 2,888,924 
Redeemable noncontrolling interest8,620
 8,448
Equity:   Equity:
Preferred stock, $0.01 par value, 2,000 shares authorized, no shares issued and outstanding—
 —
Preferred stock, $0.01 par value, 2,000 shares authorized, no shares issued and outstanding— — 
Common stock, $0.01 par value, 100,000 shares authorized, 45,169 shares issued and outstanding at September 30, 2017; 100,000 shares authorized, 46,356 shares issued and outstanding at December 31, 2016452
 464
Common stock, $0.01 par value; 100,000 shares authorized, 39,242 shares issued and outstanding at June 30, 2023; 100,000 shares authorized, 38,980 shares issued and outstanding at December 31, 2022Common stock, $0.01 par value; 100,000 shares authorized, 39,242 shares issued and outstanding at June 30, 2023; 100,000 shares authorized, 38,980 shares issued and outstanding at December 31, 2022392 390 
Additional paid-in capital52,049
 66,414
Additional paid-in capital2,541 2,172 
Retained earnings1,124,762
 1,049,367
Retained earnings1,510,592 1,573,025 
Accumulated other comprehensive loss(166,397) (251,944)Accumulated other comprehensive loss(348,000)(347,926)
Total stockholders' equity - PRA Group, Inc.1,010,866
 864,301
Total stockholders' equity - PRA Group, Inc.1,165,525 1,227,661 
Noncontrolling interest53,016
 52,862
Noncontrolling interest74,149 59,089 
Total equity1,063,882
 917,163
Total equity1,239,674 1,286,750 
Total liabilities and equity$3,460,777
 $3,163,999
Total liabilities and equity$4,320,859 $4,175,674 
The accompanying notes are an integral part of these consolidated financial statements.

Consolidated Financial Statements.

3

PRA Group, Inc.
Consolidated Income Statements
For the threeThree and nine months ended SeptemberSix Months Ended June 30, 20172023 and 20162022
(unaudited)
(Amounts in thousands, except per share amounts)
Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended June 30,Six Months Ended June 30,
2017 2016 2017 20162023202220232022
Revenues:       Revenues:
Income recognized on finance receivables, net$197,248
 $202,639
 $582,626
 $613,154
Fee income2,671
 17,597
 18,873
 56,210
Portfolio incomePortfolio income$184,290 $194,009 $372,532 $401,541 
Changes in expected recoveriesChanges in expected recoveries21,136 56,567 (15,776)86,481 
Total portfolio revenueTotal portfolio revenue205,426 250,576 356,756 488,022 
Other revenue1,091
 1,748
 6,401
 5,958
Other revenue3,810 7,686 7,950 10,845 
Total revenues201,010
 221,984
 607,900
 675,322
Total revenues209,236 258,262 364,706 498,867 
Operating expenses:       Operating expenses:
Compensation and employee services68,541
 65,898
 203,780
 197,456
Compensation and employee services65,788 74,137 148,191 145,233 
Legal collection expenses27,626
 33,447
 90,556
 97,476
Legal collection feesLegal collection fees9,551 9,554 18,389 20,427 
Legal collection costsLegal collection costs21,522 17,746 45,467 34,303 
Agency fees7,599
 12,034
 27,653
 34,227
Agency fees17,677 14,826 35,055 32,214 
Outside fees and services15,631
 14,731
 46,977
 46,415
Outside fees and services18,262 27,493 43,206 46,871 
Communication8,713
 7,814
 25,104
 26,119
Communication10,117 9,528 20,644 22,111 
Rent and occupancy3,668
 3,875
 10,838
 11,709
Rent and occupancy4,319 4,633 8,767 9,620 
Depreciation and amortization4,841
 6,184
 15,097
 18,339
Depreciation and amortization3,482 3,865 7,071 7,643 
Other operating expenses10,140
 10,513
 32,071
 32,443
Other operating expenses12,957 12,743 25,999 24,741 
Total operating expenses146,759
 154,496
 452,076
 464,184
Total operating expenses163,675 174,525 352,789 343,163 
Income from operations54,251
 67,488
 155,824
 211,138
 Income from operations45,561 83,737 11,917 155,704 
Other income and (expense):       Other income and (expense):
Gain on sale of subsidiaries307
 —
 48,474
 —
Interest expense, net(25,899) (19,310) (69,662) (59,838)Interest expense, net(43,022)(31,562)(81,305)(63,310)
Foreign exchange (loss)/gain(1,084) 5,004
 (1,421) 5,183
Income before income taxes27,575
 53,182
 133,215
 156,483
Provision for income taxes10,682
 16,664
 52,857
 50,244
Net income16,893
 36,518
 80,358
 106,239
Adjustment for net income attributable to noncontrolling interest1,338
 2,212
 4,963
 3,494
Net income attributable to PRA Group, Inc.$15,555
 $34,306
 $75,395
 $102,745
Net income per common share attributable to PRA Group, Inc.:       
Foreign exchange gain, netForeign exchange gain, net429 1,319 420 787 
OtherOther(230)(181)(880)(671)
Income/(loss) before income taxesIncome/(loss) before income taxes2,738 53,313 (69,848)92,510 
Income tax expense/(benefit)Income tax expense/(benefit)1,578 14,177 (17,105)18,756 
Net income/(loss)Net income/(loss)1,160 39,136 (52,743)73,754 
Adjustment for net income/(loss) attributable to noncontrolling interestsAdjustment for net income/(loss) attributable to noncontrolling interests4,964 2,652 9,690 (2,702)
Net income/(loss) attributable to PRA Group, Inc.Net income/(loss) attributable to PRA Group, Inc.$(3,804)$36,484 $(62,433)$76,456 
Net income/(loss) per common share attributable to PRA Group, Inc.:Net income/(loss) per common share attributable to PRA Group, Inc.:
Basic$0.34
 $0.74
 $1.64
 $2.22
Basic$(0.10)$0.92 $(1.60)$1.90 
Diluted$0.34
 $0.74
 $1.64
 $2.21
Diluted$(0.10)$0.91 $(1.60)$1.88 
Weighted average number of shares outstanding:       Weighted average number of shares outstanding:
Basic45,168
 46,343
 45,838
 46,307
Basic39,190 39,779 39,111 40,278 
Diluted45,286
 46,434
 45,991
 46,403
Diluted39,190 39,900 39,111 40,602 
The accompanying notes are an integral part of these consolidated financial statements.

Consolidated Financial Statements.

4

PRA Group, Inc.
Consolidated Statements of Comprehensive Income/(Loss)Income
For the threeThree and nine months ended SeptemberSix Months Ended June 30, 20172023 and 20162022
(unaudited)
(Amounts in thousands)
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Net income$16,893
 $36,518
 $80,358
 $106,239
Other comprehensive income:       
Change in foreign currency translation39,548
 13,721
 81,393
 37,435
Total comprehensive income56,441
 50,239
 161,751
 143,674
Comprehensive income attributable to noncontrolling interest:       
Net income attributable to noncontrolling interest1,338
 2,212
 4,963
 3,494
Change in foreign currency translation1,730
 (324) (4,156) 8,462
Comprehensive income attributable to noncontrolling interest3,068
 1,888
 807
 11,956
Comprehensive income attributable to PRA Group, Inc.$53,373
 $48,351
 $160,944
 $131,718
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Net income/(loss)$1,160 $39,136 $(52,743)$73,754 
Other comprehensive income/(loss), net of tax
Currency translation adjustments7,083 (115,536)5,533 (103,266)
Cash flow hedges5,719 5,837 888 24,417 
Debt securities available-for-sale(80)(242)48 (402)
Other comprehensive income/(loss)12,722 (109,941)6,469 (79,251)
Total comprehensive income/(loss)13,882 (70,805)(46,274)(5,497)
Less comprehensive income/(loss) attributable to noncontrolling interests8,956 (3,177)16,232 (1,041)
Comprehensive income/(loss) attributable to PRA Group, Inc.$4,926 $(67,628)$(62,506)$(4,456)
The accompanying notes are an integral part of these consolidated financial statements.

Consolidated Financial Statements.

5

PRA Group, Inc.
Consolidated StatementStatements of Changes in Equity
For the nine months ended SeptemberSix Months Ended June 30, 20172023
(unaudited)
(Amounts in thousands)

 Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Noncontrolling Interest Total Equity
 Shares Amount     
Balance at December 31, 201646,356
 $464
 $66,414
 $1,049,367
 $(251,944) $52,862
 $917,163
Components of comprehensive income:             
Net income—
 —
 —
 75,395
 —
 5,962
 81,357
Foreign currency translation adjustment—
 —
 —
 —
 85,547
 (4,379) 81,168
Distributions paid to noncontrolling interest—
 —
 —
 —
 —
 (1,429) (1,429)
Equity component of convertible debt—
 —
 44,910
 —
 —
 —
 44,910
Deferred taxes on equity component of convertible debt—
 —
 (18,213) —
 —
 —
 (18,213)
Vesting of nonvested shares125
 1
 (1) —
 —
 —
 —
Repurchase and cancellation of common stock(1,312) (13) (44,896) —
 —
 —
 (44,909)
Amortization of share-based compensation—
 —
 6,263
 —
 —
 —
 6,263
Employee stock relinquished for payment of taxes—
 —
 (2,428) —
 —
 —
 (2,428)
Balance at September 30, 201745,169
 $452
 $52,049
 $1,124,762
 $(166,397) $53,016
 $1,063,882
Common StockAdditional Paid-InRetainedAccumulated Other ComprehensiveNoncontrollingTotal
SharesAmountCapitalEarningsIncome/(Loss)InterestEquity
Balance at December 31, 202238,980 $390 $2,172 $1,573,025 $(347,926)$59,089 $1,286,750 
Components of comprehensive income, net of tax:
Net income/(loss)— — — (58,629)— 4,726 (53,903)
Currency translation adjustments— — — — (4,101)2,551 (1,550)
Cash flow hedges— — — — (4,831)— (4,831)
Debt securities available-for-sale— — — — 128 — 128 
Vesting of restricted stock190 2 (2)— — — — 
Share-based compensation expense— — 3,799 — — — 3,799 
Employee stock relinquished for payment of taxes— — (5,684)— — — (5,684)
Balance at March 31, 202339,170 $392 $285 $1,514,396 $(356,730)$66,366 $1,224,709 
Components of comprehensive income, net of tax:
Net income/(loss)— — — (3,804)— 4,964 1,160 
Currency translation adjustments— — — — 3,091 3,992 7,083 
Cash flow hedges— — — — 5,719 — 5,719 
Debt securities available-for-sale— — — — (80)— (80)
Distributions to noncontrolling interest— — — — — (1,173)(1,173)
Vesting of restricted stock72 — — — — — — 
Share-based compensation expense— — 2,715 — — — 2,715 
Employee stock relinquished for payment of taxes— — (459)— — — (459)
Balance at June 30, 202339,242 $392 $2,541 $1,510,592 $(348,000)$74,149 $1,239,674 

The accompanying notes are an integral part of these consolidated financial statements.

Consolidated Financial Statements.



6

PRA Group, Inc.
Consolidated Statements of Changes in Equity
For the Six Months Ended June 30, 2022
(unaudited)
(Amounts in thousands)

Common StockAdditional Paid-InRetainedAccumulated Other ComprehensiveNoncontrollingTotal
SharesAmountCapitalEarningsIncome/(Loss)InterestEquity
Balance at December 31, 202141,008 $410 $— $1,552,845 $(266,909)$38,491 $1,324,837 
Components of comprehensive income, net of tax:
Net income/(loss)— — — 39,972 — (5,354)34,618 
Currency translation adjustments— — — — 4,780 7,490 12,270 
Cash flow hedges— — — — 18,580 — 18,580 
Debt securities available-for-sale— — — — (160)— (160)
Vesting of restricted stock262 3 (3)— — — — 
Repurchase and cancellation of common stock(860)(9)4,527 (43,972)— — (39,454)
Share-based compensation expense— 3,891 — — — 3,891 
Employee stock relinquished for payment of taxes— — (8,415)— — — (8,415)
Balance at March 31, 202240,410 $404 $— $1,548,845 $(243,709)$40,627 $1,346,167 
Components of comprehensive income, net of tax:
Net income/(loss)— — — 36,484 — 2,652 39,136 
Currency translation adjustments— — — — (109,707)(5,829)(115,536)
Cash flow hedges— — — — 5,837 — 5,837 
Debt securities available-for-sale— — — — (242)— (242)
Distributions to noncontrolling interest— — — — — (3,494)(3,494)
Contributions from noncontrolling interest— — — — — 1,599 1,599 
Vesting of restricted stock37 — — — — — — 
 Repurchase and cancellation of common stock(808)(8)(3,835)(31,092)— — (34,935)
Share-based compensation expense— — 3,849 — — — 3,849 
Employee stock relinquished for payment of taxes— — (14)— — — (14)
Balance at June 30, 202239,639 $396 $— $1,554,237 $(347,821)$35,555 $1,242,367 
The accompanying notes are an integral part of these Consolidated Financial Statements.



7

PRA Group, Inc.
Consolidated Statements of Cash Flows
For the nine months ended SeptemberSix Months Ended June 30, 20172023 and 20162022
(unaudited)
(Amounts in thousands)
 Nine Months Ended September 30,
 2017 2016
Cash flows from operating activities:   
Net income$80,358
 $106,239
Adjustments to reconcile net income to net cash provided by operating activities:   
Amortization of share-based compensation6,263
 9,468
Depreciation and amortization15,097
 18,339
Gain on sale of subsidiaries(48,474) —
Amortization of debt discount and issuance costs12,828
 7,450
Deferred tax benefit(49,974) (724)
Net foreign currency transaction loss/(gain)1,303
 (5,489)
Other(3,113) —
Changes in operating assets and liabilities:   
Other assets(274) 3,531
Other receivables, net1,342
 7,181
Accounts payable1,242
 (1,479)
Income taxes payable, net(10,692) (13,832)
Accrued expenses(7,198) (12,344)
Other liabilities(9,628) 565
Net cash (used in)/provided by operating activities(10,920) 118,905
Cash flows from investing activities:   
Purchases of property and equipment(10,054) (11,542)
Acquisition of finance receivables, net of buybacks(718,553) (697,794)
Collections applied to principal on finance receivables553,713
 530,081
Business acquisitions, net of cash acquired—
 (66,961)
Proceeds from sale of subsidiaries, net93,304
 —
Purchase of investments(3,569) (380)
Proceeds from sales and maturities of investments7,482
 10,299
Net cash used in investing activities(77,677) (236,297)
Cash flows from financing activities:   
Proceeds from lines of credit905,841
 858,368
Principal payments on lines of credit(1,392,176) (895,161)
Repurchases of common stock(44,909) —
Tax withholdings related to share-based payments(2,428) (2,478)
Distributions paid to noncontrolling interest(1,429) (934)
Principal payments on long-term debt(12,515) (187,264)
Proceeds from long-term debt310,000
 297,893
Payments of debt issuance costs(18,240) (17,526)
Net increase in interest-bearing deposits10,140
 40,198
Proceeds from convertible debt345,000
 —
Net cash provided by financing activities99,284
 93,096
Effect of exchange rate on cash8,780
 44,715
Net increase in cash and cash equivalents19,467
 20,419
Cash and cash equivalents, beginning of period94,287
 71,372
Cash and cash equivalents, end of period$113,754
 $91,791
Supplemental disclosure of cash flow information:   
Cash paid for interest$60,229
 $49,492
Cash paid for income taxes114,603
 59,164
Six Months Ended June 30,
20232022
Cash flows from operating activities:
Net income/(loss)$(52,743)$73,754 
Adjustments to reconcile net income to net cash provided by operating activities:
Share-based compensation expense6,514 7,740 
Depreciation and amortization7,071 7,643 
Gain on extinguishment of debt(343)— 
Amortization of debt discount and issuance costs4,825 5,098 
Changes in expected recoveries15,776 (86,481)
Deferred income taxes(24,439)484 
Net unrealized foreign currency transactions(27,907)(22,597)
Fair value in earnings for equity securities593 (148)
Other(1,301)(614)
Changes in operating assets and liabilities:
Other assets(1,306)(490)
Accounts payable(1,016)1,288 
Income taxes payable, net(13,629)(5,941)
Accrued expenses6,650 (16,505)
Other liabilities738 (5,382)
Right-of-use asset/lease liability(322)387 
Net cash provided by/(used in) operating activities(80,839)(41,764)
Cash flows from investing activities:
Purchases of property and equipment, net(1,091)(8,212)
Purchases of finance receivables(559,547)(378,798)
Recoveries applied to negative allowance463,966 535,537 
Purchases of investments(60,057)(2,292)
Proceeds from sales and maturities of investments62,762 775 
Net cash provided by/(used in) investing activities(93,967)147,010 
Cash flows from financing activities:
Proceeds from lines of credit459,432 1,262,320 
Principal payments on lines of credit(274,772)(1,267,470)
Retirement of Convertible Senior Notes due 2023(345,000)— 
Proceeds from issuance of Senior Notes due 2028400,000 — 
Principal payments on long-term debt(5,000)(5,000)
Repurchases of senior notes(3,657)— 
Repurchases of common stock— (86,371)
Payments of origination cost and fees(5,324)(7,727)
Tax withholdings related to share-based payments(6,142)(8,428)
Distributions paid to noncontrolling interest(1,172)(3,493)
Contributions from noncontrolling interest— 1,599 
Net increase/(decrease) in interest-bearing deposits(9,869)4,326 
Net cash provided by/(used in) financing activities208,496 (110,244)
Effect of exchange rate on cash6,216 (14,958)
Net increase/(decrease) in cash and cash equivalents39,906 (19,956)
Cash and cash equivalents, beginning of period84,759 89,072 
Cash and cash equivalents, end of period$124,665 $69,116 
Supplemental disclosure of cash flow information:
Cash paid for interest$51,652 $59,487 
Cash paid for income taxes20,859 24,127 
Cash, cash equivalents and restricted cash reconciliation:
Cash and cash equivalents per Consolidated Balance Sheets$111,375 $67,974 
Restricted cash included in Other assets per Consolidated Balance Sheets13,290 1,142 
Total cash, cash equivalents and restricted cash$124,665 $69,116 
The accompanying notes are an integral part of these consolidated financial statements.Consolidated Financial Statements.

8
PRA Group, Inc.
Notes to Consolidated Financial Statements




1. Organization and Business:
Nature of operations: As used herein, the terms "PRA Group," "the Company,the "Company," or similar terms refer to PRA Group, Inc. and its subsidiaries.
PRA Group, Inc., a Delaware corporation, and its subsidiaries, is a global financial and business services company with operations in the Americas, Europe and Europe.Australia. The Company's primary business is the purchase, collection and management of portfolios of nonperforming loans. The Company also provides the following fee-based services:services on class action claims recovery servicesrecoveries and purchases;by servicing of consumer bankruptcy accounts in the United States ("U.S."); and, to a lesser extent, contingent collections.
Basis of nonperforming loans in Europe and South America.
presentation: The consolidated financial statementsConsolidated Financial Statements of the Company are prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). The accompanying interim financial statements have been prepared in accordance with the instructions for Quarterly Reports on Form 10-Q and, therefore, do not include all information and Notes to the Consolidated Financial Statements necessary for a complete presentation of financial position, results of operations, comprehensive income/(loss) and cash flows in conformity with GAAP. In the opinion of management, all adjustments, consisting of normal and recurring items, necessary for the fair presentation of the Company's Consolidated Balance Sheets as of June 30, 2023, its Consolidated Income Statements and Statements of Comprehensive Income for the three and six months ended June 30, 2023 and 2022, and its Consolidated Statements of Changes in Equity and Statements of Cash Flows for the six months ended June 30, 2023 and 2022, have been included. The Company's Consolidated Income Statements for the three and six months ended June 30, 2023 may not be indicative of future results.
These unaudited Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022 (the "2022 Form 10-K").
Reclassification of prior year presentation: Certain prior year amounts have been reclassified for consistency with the current year presentation. Fee income is now included within Other revenue on the Consolidated Income Statements.
Consolidation: The Consolidated Financial Statements include the accounts of all of its subsidiaries.PRA Group and other entities in which the Company has a controlling interest. All significant intercompany accounts and transactions have been eliminated. Under
Entities in which the guidanceCompany has a controlling financial interest, through ownership of the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 280 "Segment Reporting" ("ASC 280"),majority of the entities’ voting equity interests, or through other contractual rights that give the Company control, consist of entities which purchase and collect on portfolios of nonperforming loans.
Investments in companies in which the Company has significant influence over operating and financing decisions, but does not own a majority of the voting equity interests or exercise control, are accounted for in accordance with the equity method of accounting, which requires the Company to recognize its proportionate share of the entity's net earnings. Income or loss from these investments is included in Other revenue.
The Company performs on-going reassessments of whether changes in facts and circumstances regarding the Company’s involvement with an entity would cause the Company’s consolidation conclusions to change.
Segments: The Company has determined that it has severaltwo operating segments that meet the aggregation criteria of Accounting Standards Codification ("ASC") 280, Segment Reporting ("ASC 280,280") and, therefore, it has one reportable segment,segment; accounts receivable management,management. This conclusion is based on similarities among the operating units, including economic characteristics, the nature of the products and services, the nature of the production processes, the types or class of customer for their products and services, the methods used to distribute their products and services and the nature of the regulatory environment.
The following table shows the amount of revenue generated
9
PRA Group, Inc.
Notes to Consolidated Financial Statements
Revenues and long-lived assets by geographical location: Revenues for the three and ninesix months ended SeptemberJune 30, 20172023 and 2016, respectively,2022, and long-lived assets held at SeptemberJune 30, 20172023 and 2016, respectively,2022, both for the U.S., the Company's country of domicile, and outside of the U.S., were as follows (amounts in thousands):
As of and for theAs of and for the
Three Months Ended June 30, 2023Three Months Ended June 30, 2022
Revenues (2)
Long-Lived Assets
Revenues (2)
Long-Lived Assets
U.S.$94,246 $72,114 $136,852 $82,927 
United Kingdom35,261 11,877 45,880 12,105 
Brazil25,369 3 12,814 3 
Other (1)
54,360 13,015 62,716 15,024 
Total$209,236 $97,009 $258,262 $110,059 
 As Of And For The As Of And For The
 Three Months Ended September 30, 2017 Three Months Ended September 30, 2016
 Revenues Long-Lived Assets Revenues Long-Lived Assets
United States$137,323
 $28,585
 $153,114
 $33,898
Outside the United States63,687
 7,843
 68,870
 10,456
Total$201,010
 $36,428
 $221,984
 $44,354
        
 As Of And For The As Of And For The
 Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016
 Revenues Long-Lived Assets Revenues Long-Lived Assets
United States$415,761
 $28,585
 $489,260
 $33,898
Outside the United States192,139
 7,843
 186,062
 10,456
Total$607,900
 $36,428
 $675,322
 $44,354

As of and for theAs of and for the
Six Months Ended June 30, 2023Six Months Ended June 30, 2022
Revenues (2)
Long-Lived Assets
Revenues (2)
Long-Lived Assets
U.S.$153,393 $72,114 $288,277 $82,927 
United Kingdom68,570 11,877 89,834 12,105 
Brazil44,635 3 32,080 3 
Other (1)
98,108 13,015 88,676 15,024 
Total$364,706 $97,009 $498,867 $110,059 
(1) None of the countries included in "Other" comprise greater than 10% of the Company's consolidated revenues or long-lived assets.
(2) Based on the Company’s financial statement information used to produce the Company's general-purpose financial statements, it is impracticable to report further breakdowns of revenues from external customers by product or service.
Revenues are attributed to countries based on the location of the related operations. Long-lived assets consist of net property and equipment.equipment and right-of-use ("ROU") assets. The Company reports revenues earned from its debt purchasing and collection activities on nonperforming loans, fee-based services and its fee-based services. It is impracticable for the Company to report further breakdowns of revenues from external customers by product or service.investments.
The accompanying interim financial statements have been prepared in accordance with the instructions for Form 10-Q and, therefore, do not include all information and notes to the consolidated financial statements necessary for a complete presentation of financial position, results of operations, comprehensive income and cash flows in conformity with GAAP. In the opinion of management, all adjustments, consisting of normal and recurring items, necessary for the fair presentation
2. Finance Receivables, net:
Finance receivables, net consisted of the Company's consolidated balance sheet as of Septemberfollowing at June 30, 2017, its consolidated income statements2023 and statements of comprehensive income/(loss)December 31, 2022 (amounts in thousands):
June 30, 2023December 31, 2022
Amortized cost$— $— 
Negative allowance for expected recoveries3,424,548 3,295,008 
Balance at end of period$3,424,548 $3,295,008 
Three Months Ended June 30, 2023 and 2022
Changes in the negative allowance for expected recoveries by portfolio segment for the three and nine months ended SeptemberJune 30, 20172023 and 2016, its consolidated statement of changes2022 were as follows (amounts in equity for the nine months ended September 30, 2017, and its consolidated statements of cash flows for the nine months ended September 30, 2017 and 2016, have been included. The consolidated income statements of the Company for the three and nine months ended September 30, 2017 may not be indicative of future results. Certain prior period amounts have been reclassified for consistency with the current period presentation. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's 2016 Annual Report on Form 10-K for the year ended December 31, 2016, filed with the Securities and Exchange Commission on March 1, 2017.thousands):
Three Months Ended June 30, 2023
CoreInsolvencyTotal
Balance at beginning of period$2,935,850 $350,647 $3,286,497 
Initial negative allowance for expected recoveries - portfolio acquisitions (1)
308,274 19,485 327,759 
Foreign currency translation adjustment23,380 4,034 27,414 
Recoveries applied to negative allowance (2)
(198,897)(39,361)(238,258)
Changes in expected recoveries (3)
17,798 3,338 21,136 
Balance at end of period$3,086,405 $338,143 $3,424,548 

10
PRA Group, Inc.
Notes to Consolidated Financial Statements


Three Months Ended June 30, 2022
CoreInsolvencyTotal
Balance at beginning of period$2,902,321 $408,426 $3,310,747 
Initial negative allowance for expected recoveries - portfolio acquisitions (1)
223,776 7,570 231,346 
Foreign currency translation adjustment(143,630)(14,132)(157,762)
Recoveries applied to negative allowance (2)
(211,028)(46,238)(257,266)
Changes in expected recoveries (3)
43,322 13,245 56,567 
Balance at end of period$2,814,761 $368,871 $3,183,632 
2. Finance Receivables, net:(1) Initial negative allowance for expected recoveries - portfolio acquisitions
Changes in finance receivables, netPortfolio acquisitions for the three and nine months ended SeptemberJune 30, 20172023 and 20162022 were as follows (amounts in thousands):
Three Months Ended June 30, 2023
CoreInsolvencyTotal
Face value$2,217,262 $91,940 $2,309,202 
Noncredit discount(240,532)(6,742)(247,274)
Allowance for credit losses at acquisition(1,668,456)(65,713)(1,734,169)
Purchase price$308,274 $19,485 $327,759 
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Balance at beginning of period$2,520,883
 $2,399,949
 $2,307,969
 $2,202,113
Acquisitions of finance receivables (1)
203,052
 159,546
 716,586
 741,402
Foreign currency translation adjustment38,482
 1,974
 106,989
 (21,026)
Cash collections applied to principal and net allowance charges(184,586) (169,061) (553,713) (530,081)
Balance at end of period$2,577,831
 $2,392,408
 $2,577,831
 $2,392,408
Three Months Ended June 30, 2022
CoreInsolvencyTotal
Face value$1,108,890 $36,076 $1,144,966 
Noncredit discount(145,332)(3,250)(148,582)
Allowance for credit losses at acquisition(739,782)(25,256)(765,038)
Purchase price$223,776 $7,570 $231,346 
(1)
Acquisitions of finance receivables are net of buybacks and include certain capitalized acquisition related costs. They also include the acquisition date finance receivables portfolios that are acquired in connection with certain business acquisitions.
DuringThe initial negative allowance recorded on portfolio acquisitions for the three months ended SeptemberJune 30, 2017, the Company purchased finance receivables portfolios with a face value of $1.4 billion for $210.9 million. During the three months ended September 30, 2016, the Company purchased finance receivables portfolios with a face value of $3.0 billion for $161.3 million. During the nine months ended September 30, 2017, the Company purchased finance receivables portfolios with a face value of $5.1 billion for $734.4 million. During the nine months ended September 30, 2016, the Company purchased finance receivables portfolios with a face value of $8.9 billion for $747.5 million. At September 30, 2017, the estimated remaining collections ("ERC") on the receivables purchased during the three months ended September 30, 20172023 and 2016 were $333.2 million and $208.5 million, respectively. At September 30, 2017, the ERC on the receivables purchased during the nine months ended September 30, 2017 and 2016 were $1.1 billion and $975.4 million, respectively. At September 30, 2017 and 2016, total ERC2022 was $5.4 billion and $5.3 billion, respectively.
At the time of acquisition, the life of each pool is estimated based on projected amounts and timing of cash collections. Based upon current projections, cash collections expected to be applied to principal on finance receivables as of September 30, 2017 are estimated to be as follows for the 12 months in the periods ending September 30, (amounts in thousands):
Three Months Ended June 30, 2023
CoreInsolvencyTotal
Allowance for credit losses at acquisition$(1,668,456)$(65,713)$(1,734,169)
Writeoffs, net1,668,456 65,713 1,734,169 
Expected recoveries308,274 19,485 327,759 
Initial negative allowance for expected recoveries$308,274 $19,485 $327,759 
2018$734,967
2019585,527
2020454,002
2021366,386
2022230,393
2023110,818
202442,604
202524,762
202617,871
202710,501
Total ERC expected to be applied to principal$2,577,831
Three Months Ended June 30, 2022
CoreInsolvencyTotal
Allowance for credit losses at acquisition$(739,782)$(25,256)$(765,038)
Writeoffs, net739,782 25,256 765,038 
Expected recoveries223,776 7,570 231,346 
Initial negative allowance for expected recoveries$223,776 $7,570 $231,346 
At September 30, 2017, the Company had aggregate net finance receivables balances in pools accounted for under the cost recovery method of $109.3 million; at December 31, 2016, the amount was $105.5 million.
Accretable yield represents the amount of income recognized on finance receivables the Company can expect to generate over the remaining life of its existing portfolios based on estimated future cash flows as of the balance sheet date. Additions represent the original expected accretable yield, on portfolios purchased during the period, to be earned by the Company. Net reclassifications from nonaccretable difference to accretable yield primarily result from the increase in the Company's estimate of future cash flows. When applicable, net reclassifications to nonaccretable difference from accretable yield result from the decrease in the Company's estimates of future cash flows and allowance charges that together exceed the increase in the Company's estimate of future cash flows.




11
PRA Group, Inc.
Notes to Consolidated Financial Statements


(2) Recoveries applied to negative allowance
Changes in accretable yieldRecoveries applied to the negative allowance for the three and nine months ended SeptemberJune 30, 20172023 and 20162022 were as follows (amounts in thousands):
Three Months Ended June 30, 2023
CoreInsolvencyTotal
Recoveries (a)
$373,178 $49,370 $422,548 
Less - amounts reclassified to portfolio income174,281 10,009 184,290 
Recoveries applied to negative allowance$198,897 $39,361 $238,258 
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Balance at beginning of period$2,803,590
 $2,931,426
 $2,740,006
 $2,727,204
Income recognized on finance receivables, net(197,248) (202,639) (582,626) (613,154)
Additions127,829
 121,643
 477,018
 581,583
Reclassifications from nonaccretable difference68,715
 5,936
 93,343
 95,904
Foreign currency translation adjustment43,231
 673
 118,376
 65,502
Balance at end of period$2,846,117
 $2,857,039
 $2,846,117
 $2,857,039
Three Months Ended June 30, 2022
CoreInsolvencyTotal
Recoveries (a)
$393,149 $58,126 $451,275 
Less - amounts reclassified to portfolio income182,121 11,888 194,009 
Recoveries applied to negative allowance$211,028 $46,238 $257,266 
The following is a summary of activity within the Company's valuation allowance account, all of which relates to loans acquired with deteriorated credit quality,(a) Recoveries include cash collections, buybacks and other cash-based adjustments.
(3) Changes in expected recoveries
Changes in expected recoveries for the three and nine months ended SeptemberJune 30, 20172023 and 20162022 were as follows (amounts in thousands):
Three Months Ended June 30, 2023
CoreInsolvencyTotal
Changes in expected future recoveries$(3,738)$(474)$(4,212)
Recoveries received in excess of forecast21,536 3,812 25,348 
Changes in expected recoveries$17,798 $3,338 $21,136 
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Beginning balance$218,775
 $136,752
 $211,465
 $114,861
Allowance charges3,824
 14,246
 9,973
 37,686
Reversal of previously recorded allowance charges(412) (1,100) (561) (1,722)
Net allowance charges3,412
 13,146
 9,412
 35,964
Foreign currency translation adjustment678
 (328) 1,988
 (1,255)
Ending balance$222,865
 $149,570
 $222,865
 $149,570
Three Months Ended June 30, 2022
CoreInsolvencyTotal
Changes in expected future recoveries$15,640 $5,059 $20,699 
Recoveries received in excess of forecast27,682 8,186 35,868 
Changes in expected recoveries$43,322 $13,245 $56,567 
3. Investments:
Investments consist ofIn order to estimate future cash collections, the following at September 30, 2017Company considered historical performance and December 31, 2016 (amountscurrent economic forecasts, as well as expectations for short-term and long-term growth and consumer habits in thousands):
 September 30, 2017 December 31, 2016
Available-for-sale   
Government bonds and mutual funds$3,769
 $2,138
Held-to-maturity   
Securitized assets57,031
 51,407
Other investments   
Private equity funds14,712
 14,998
Total investments$75,512
 $68,543
Available-for-Sale
Government bonds and mutual funds:The Company's investmentsthe various geographies in government bonds and mutual funds are classified as available-for-sale and are stated at fair value. Fair value is determined using quoted market prices. Unrealized gains and losses are included in comprehensive income and reported in equity.
Held-to-Maturity
Investments in securitized assets:which the Company operates. The Company holds a majority interestconsidered recent collection activity in a closed-end Polish investment fund. The certificates, which provide a preferred return basedits determination to adjust assumptions related to estimated remaining collections ("ERC") for certain pools. Based on these considerations, the expected net incomeCompany’s estimates of the portfolios, are accounted for as a beneficial interestERC incorporate changes in securitized financial assetsboth amounts and stated at amortized cost. The Company has determined it has the ability and intent to hold these certificates until maturity, which occurs when the fund terminates or liquidates its assets. The preferred return is not a guaranteed return. Income is recognized under FASB ASC Topic 325-40, "Beneficial Interest in Securitized Financial Assets" ("ASC 325-40"). Prior to April 1, 2017, income was recognized using the effective yield method. Effective April 1, 2017, the Company determined that it could not reasonably forecast the timing of expected cash collections over the forecast period.
Changes in expected recoveries for the three months ended June 30, 2023 were a net positive $21.1 million. This includes $25.3 million in recoveries received in excess of forecast (cash collections overperformance) and a $4.2 million negative adjustment to changes in expected future recoveries. The $25.3 million in recoveries received in excess of forecast was largely due to overperformance generated from larger than expected one-time payments in Europe and performance on new vintages in South America.
Changes in expected recoveries for the three months ended June 30, 2022 were a net positive $56.6 million. This includes $35.9 million in recoveries received in excess of forecast, reflecting strong cash flowscollections overperformance in Europe and accordingly began usinga $20.7 million positive adjustment to changes in expected future recoveries. The changes in expected future recoveries included the cost recovery methodCompany's assumption that the majority of the overperformance was due to recognize income.acceleration in the timing of cash collections. The Company also made near-term adjustments to expected future collections in certain geographies, bringing them in line with recent performance trends, with corresponding adjustments made later in the forecast period.

12
PRA Group, Inc.
Notes to Consolidated Financial Statements

Six Months Ended June 30, 2023 and 2022
Changes in the negative allowance for expected recoveries by portfolio segment for the six months ended June 30, 2023 and 2022 were as follows (amounts in thousands):
Six Months Ended June 30, 2023
CoreInsolvencyTotal
Balance at beginning of period$2,936,207 $358,801 $3,295,008 
Initial negative allowance for expected recoveries - portfolio acquisitions (1)
515,595 42,389 557,984 
Foreign currency translation adjustment43,216 8,082 51,298 
Recoveries applied to negative allowance (2)
(385,283)(78,683)(463,966)
Changes in expected recoveries (3)
(23,330)7,554 (15,776)
Balance at end of period$3,086,405 $338,143 $3,424,548 
Six Months Ended June 30, 2022
CoreInsolvencyTotal
Balance at beginning of period$2,989,932 $438,353 $3,428,285 
Initial negative allowance for expected recoveries - portfolio acquisitions (1)
353,180 25,618 378,798 
Foreign currency translation adjustment(154,639)(19,756)(174,395)
Recoveries applied to negative allowance (2)
(442,181)(93,356)(535,537)
Changes in expected recoveries (3)
68,469 18,012 86,481 
Balance at end of period$2,814,761 $368,871 $3,183,632 
(1) Initial negative allowance for expected recoveries - portfolio acquisitions
Portfolio acquisitions for the six months ended June 30, 2023 and 2022 were as follows (amounts in thousands):
Six Months Ended June 30, 2023
CoreInsolvencyTotal
Face value$3,725,226 $196,750 $3,921,976 
Noncredit discount(391,043)(14,784)(405,827)
Allowance for credit losses at acquisition(2,818,588)(139,577)(2,958,165)
Purchase price$515,595 $42,389 $557,984 
Six Months Ended June 30, 2022
CoreInsolvencyTotal
Face value$2,056,947 $133,159 $2,190,106 
Noncredit discount(236,932)(9,102)(246,034)
Allowance for credit losses at acquisition(1,466,835)(98,439)(1,565,274)
Purchase price$353,180 $25,618 $378,798 





13

PRA Group, Inc.
Notes to Consolidated Financial Statements
The underlying securities have both known principal repayment termsinitial negative allowance recorded on portfolio acquisitions for the six months ended June 30, 2023 and 2022 was as wellfollows (amounts in thousands):
Six Months Ended June 30, 2023
CoreInsolvencyTotal
Allowance for credit losses at acquisition$(2,818,588)$(139,577)$(2,958,165)
Writeoffs, net2,818,588 139,577 2,958,165 
Expected recoveries515,595 42,389 557,984 
Initial negative allowance for expected recoveries$515,595 $42,389 $557,984 
Six Months Ended June 30, 2022
CoreInsolvencyTotal
Allowance for credit losses at acquisition$(1,466,835)$(98,439)$(1,565,274)
Writeoffs, net1,466,835 98,439 1,565,274 
Expected recoveries353,180 25,618 378,798 
Initial negative allowance for expected recoveries$353,180 $25,618 $378,798 
(2) Recoveries applied to negative allowance
Recoveries applied to the negative allowance for the six months ended June 30, 2023 and 2022 were as unknown principal repaymentsfollows (amounts in thousands):
Six Months Ended June 30, 2023
CoreInsolvencyTotal
Recoveries (a)
$737,414 $99,084 $836,498 
Less - amounts reclassified to portfolio income352,131 20,401 372,532 
Recoveries applied to negative allowance$385,283 $78,683 $463,966 
Six Months Ended June 30, 2022
CoreInsolvencyTotal
Recoveries (a)
$818,657 $118,421 $937,078 
Less - amounts reclassified to portfolio income376,476 25,065 401,541 
Recoveries applied to negative allowance$442,181 $93,356 $535,537 
(a) Recoveries include cash collections, buybacks and other cash-based adjustments.
(3) Changes in expected recoveries
Changes in expected recoveries for the six months ended June 30, 2023 and 2022 were as follows (amounts in thousands):
Six Months Ended June 30, 2023
CoreInsolvencyTotal
Changes in expected future recoveries$(45,153)$191 $(44,962)
Recoveries received in excess of forecast21,823 7,363 29,186 
Changes in expected recoveries$(23,330)$7,554 $(15,776)
Six Months Ended June 30, 2022
CoreInsolvencyTotal
Changes in expected future recoveries$25,411 $1,534 $26,945 
Recoveries received in excess of forecast43,058 16,478 59,536 
Changes in expected recoveries$68,469 $18,012 $86,481 
14
PRA Group, Inc.
Notes to Consolidated Financial Statements
Changes in expected recoveries for the six months ended June 30, 2023 were a net negative $15.8 million. This includes $29.2 million in recoveries received in excess of forecast (cash collections overperformance), primarily due to potential borrower pre-payments. Accordingly, it is difficultstrong performance in Europe and South America, and a $45.0 million negative adjustment to accurately predictchanges in expected future recoveries. The changes in expected future recoveries reflect the final maturity dateCompany's assessment of these investments. Revenues recognized on these investments are recordedcertain pools, which resulted in Other Revenuea reduction of expected cash flows due to collections performance in U.S. call centers resulting from weaker economic conditions.
Changes in expected recoveries for the six months ended June 30, 2022 were a net positive $86.5 million. This includes $59.5 million in recoveries received in excess of forecast (cash collections overperformance) and a $26.9 million positive adjustment to changes in expected future recoveries. The changes in expected future recoveries included the Company's continued assumption that the majority of overperformance was due to acceleration in the consolidated income statements. Duringtiming of cash collections. The Company also made near-term adjustments to expected future collections in certain geographies, bringing them in line with recent performance trends, with corresponding adjustments made later in the threeforecast period. The change in expected recoveries also included a $20.5 million write down during the first quarter in 2022 on one portfolio in Brazil.
3. Investments:
Investments consisted of the following at June 30, 2023 and nine months ended SeptemberDecember 31, 2022 (amounts in thousands):
June 30, 2023December 31, 2022
Debt securities
Available-for-sale$62,740 $66,813 
Equity securities
Private equity funds3,427 4,373 
Equity method investments10,002 8,762 
Total investments$76,169 $79,948 
Debt Securities
Available-for-sale
Government securities: The Company's investments in government instruments, including bonds and treasury securities, are classified as available-for-sale and stated at fair value. At June 30, 2017, revenues recognized on2023 maturities for these securities were $58.9 million due within one year and $3.9 million due within one to two years.
The amortized cost and estimated fair value of investments in debt securities at June 30, 2023 and December 31, 2022 were $0 and $1.3 million, respectively. During the three and nine months ended September 30, 2016, revenues recognized on these investments were $1.5 million and $4.7 million, respectively.as follows (amounts in thousands):
Other Investments
June 30, 2023
Amortized CostGross Unrealized GainsGross Unrealized LossesAggregate Fair Value
Available-for-sale
Government securities$62,930 $77 $267 $62,740 
December 31, 2022
Amortized CostGross Unrealized GainsGross Unrealized LossesAggregate Fair Value
Available-for-sale
Government securities$67,049 $1 $237 $66,813 
Investments in privateEquity Securities
Private equity funds:funds: Investments in private equity funds represent limited partnerships in which the Company has less thanthan a 3%1% interest.
Equity Method Investments
The Company has an 11.7% interest in RCB Investimentos S.A. ("RCB"), a servicing platform for nonperforming loans in Brazil. This investment is accounted for under the equity method because the Company exercises significant influence over RCB’s operating and are carried at cost. Distributions received fromfinancial activities. Accordingly, the partnerships are includedCompany’s investment in Other Revenue inRCB is adjusted for the consolidated income statements. Distributions received in excess of the Company'sCompany’s proportionate share of accumulatedRCB’s earnings are appliedor losses, capital contributions made and distributions received.
15
PRA Group, Inc.
Notes to Consolidated Financial Statements
4. Goodwill:
The Company performs an annual review of goodwill as a reduction of the costOctober 1 of the investment. The aggregate carrying amounteach year or more frequently if indicators of cost-method investments for which cost exceeded fair value but for which an impairment lossexist. The Company performed its most recent annual review as of October 1, 2022 and concluded that goodwill was not recognized was $14.7 millionimpaired. The Company performed its quarterly impairment assessment by evaluating whether any triggering events had occurred, which included considering current market conditions, and $15.0 million at Septemberconcluded that no such events had occurred as of June 30, 2017 and December 31, 2016, respectively. We evaluate the investments based on our estimated allocable share of the expected remaining cash flows of the funds as reported by the investment manager. Distributions received from these investments were $1.2 million and $5.1 million during2023.
Changes in goodwill for the three and ninesix months ended SeptemberJune 30, 2017, respectively. Distributions received from these investments were $0.0 million2023 and $0.6 million during the three and nine months ended September 30, 2016, respectively.
The amortized cost and estimated fair value of available-for sale and held-to-maturity investments at September 30, 2017 and December 31, 20162022, were as follows (amounts in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Balance at beginning of period$420,647 $483,380 $435,921 $480,263 
Change in foreign currency translation adjustment(5,742)(46,348)(21,016)(43,231)
Balance at end of period$414,905 $437,032 $414,905 $437,032 
5. Leases:
The Company's operating lease portfolio primarily includes corporate offices and call centers. The majority of its leases have remaining lease terms of one year to 13 years, some of which include options to extend the leases for up to five years, and others include options to terminate the leases within one year. Exercises of lease renewal options are typically at the Company's sole discretion, with renewal periods included in ROU assets and lease liabilities based upon whether the Company is reasonably certain of exercising the renewal options. The Company has lease agreements with lease and non-lease components, which are generally accounted for separately. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.
As most of the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments.
The components of lease expense for the three and six months ended June 30, 2023 and 2022, were as follows (amounts in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Operating lease expense$2,604 $3,088 $5,515 $6,320 
Short-term lease expense566 195 1,027 1,099 
Sublease income(137)(115)(275)(230)
Total lease expense$3,033 $3,168 $6,267 $7,189 

Supplemental cash flow information and non-cash activity related to leases for the six months ended June 30, 2023 and 2022 were as follows (amounts in thousands):
Six Months Ended June 30,
20232022
Cash paid for amounts included in the measurement of operating lease liabilities$6,041 $5,952 
ROU assets obtained in exchange for operating lease obligations2,630 5,766 
Lease term and discount rate information related to operating leases were as follows:
Six Months Ended June 30,
20232022
Weighted-average remaining lease term (years)7.78.4
Weighted-average discount rate4.62 %4.47 %
16
PRA Group, Inc.
Notes to Consolidated Financial Statements
 September 30, 2017
 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value
Available-for-sale       
Government bonds and mutual funds$3,783
 $37
 $51
 $3,769
Held-to-maturity       
Securitized assets57,031
 —
 14,471
 42,560
        
 December 31, 2016
 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value
Available-for-sale       
Government bonds and mutual funds$2,161
 $—
 $23
 $2,138
Held-to-maturity       
Securitized assets51,407
 4,147
 —
 55,554
Maturities of lease liabilities at June 30, 2023 were as follows for the following periods (amounts in thousands):
Operating Leases
For the six months ending December 31, 2023$5,259 
For the year ending December 31, 202410,228 
For the year ending December 31, 202510,018 
For the year ending December 31, 20268,917 
For the year ending December 31, 20276,141 
Thereafter26,061 
Total lease payments66,624 
Less: imputed interest10,901 
Total present value of lease liabilities$55,723 
4.
6. Borrowings:
The Company's borrowings consisted of the following as of the dates indicatedJune 30, 2023 and December 31, 2022 (amounts in thousands):
 September 30, 2017 December 31, 2016
North American revolving credit$275,432
 $695,088
Term loans762,902
 430,764
European revolving credit373,758
 401,780
Convertible senior notes632,500
 287,500
Less: Debt discount and issuance costs(81,088) (31,031)
Total$1,963,504
 $1,784,101

PRA Group, Inc.
Notes to Consolidated Financial Statements


June 30, 2023December 31, 2022
Americas revolving credit (1)
$273,397 $186,867 
UK revolving credit512,791 453,528 
Europe revolving credit476,089 419,856 
Term loan445,000 450,000 
Senior notes1,046,000 650,000 
Convertible notes— 345,000 
2,753,277 2,505,251 
Less: Debt discount and issuance costs(13,610)(10,393)
Total$2,739,667 $2,494,858 
(1) Includes the North American revolving credit facility and an unsecured credit agreement with Banco de Occidente (the "Colombian Revolving Credit Facility"). As of June 30, 2023 and December 31, 2022, the outstanding balance under the Colombian Revolving Credit Facility was $1.3 million and $0.5 million, respectively.
The following principal payments are due on the Company's borrowings as of SeptemberJune 30, 20172023 for the 12 month12-month periods ending SeptemberJune 30, (amounts in thousands):
2024$10,587 
202510,441 
2026308,295 
20271,199,865 
2028874,089 
Thereafter350,000 
Total$2,753,277 
2018$10,000
201910,000
2020297,500
2021699,160
2022682,932
Thereafter345,000
Total$2,044,592
During the three months ended June 30, 2023, the Company repurchased a total of $4.0 million in aggregate principal amount of the senior notes.
The Company believesdetermined that it was in compliance with the covenants of its material financing arrangements as of SeptemberJune 30, 2017 and December 31, 2016.2023.
North American Revolving Credit and Term Loan
On May 5, 2017, theThe Company amended and restated its existinghas a credit agreement (as amended, and modified from time to time, the “North American Credit Agreement”) with Bank of America, N.A., as administrative agent, Bank of America, National Association, acting through its Canada branch, as the Canadian administrative agent,Administrative Agent, and a syndicate of lenders named therein.therein (the "North American Credit Agreement"). The total credit facility under the North American Credit Agreement includes an aggregate principal amount of $1.2$1.5 billion (subject to compliance with a borrowing base and applicable debt covenants), which
17
PRA Group, Inc.
Notes to Consolidated Financial Statements
consists of (i) a fully-funded $447.5$445.0 million term loan, (ii) a $705.0 million$1.0 billion domestic revolving credit facility, and (iii) a $50.0$75.0 million Canadian revolving credit facility. The facility includes an accordion feature for up to $45.0$500.0 million in additional commitments (at the option of the lender)lenders) and also provides for up to $25.0 million of letters of credit and a $25.0 million swingline loan sublimitsub-limit that would reduce amounts available for borrowing. The term and revolving loans accrue interest, at the option of the Company, at either the base rate, Canadian dollar offered rate, or the Eurodollar rate (as defined in the North American Credit Agreement)Secured Overnight Financing Rate ("SOFR"), for the applicable term plus 2.50%2.25% per annum, inor 2.00% if the caseconsolidated senior secured leverage ratio is less than or equal to 1.60 to 1.0. The revolving loans within the credit facility are subject to a 0% floor. The revolving credit facilities also bear an unused line fee of the Eurodollar rate loans and 1.50% in the case of the base rate loans. The base rate is the highest of (a) the Federal Funds Rate (as defined in the North American Credit Agreement) plus 0.50%, (b) Bank of America's prime rate, or (c) the one month Eurodollar rate plus 1.00%. Canadian Prime Rate Loans will bear interest at a rate0.35% per annum, or 0.30% if the consolidated senior secured leverage ratio is less than or equal to the Canadian Prime Rate plus 1.50%. The loans under the North American Credit Agreement mature as of May 5, 2022.1.60 to 1.0, payable quarterly in arrears and matures July 30, 2026. As of SeptemberJune 30, 2017,2023, the unused portion of the North American Credit Agreement was $479.6$802.9 million. Considering borrowing base restrictions, as of SeptemberJune 30, 2017,2023, the amount available to be drawn was $453.5$109.0 million.
TheBorrowings under the North American Credit Agreement isare guaranteed by the Company's U.S. and Canadian subsidiaries (provided that the Canadian subsidiaries only guarantee borrowings under the Canadian revolving credit facility) and are secured by a first priority lien on substantially all of the Company's North American assets. The North American Credit Agreement contains restrictive covenants and events of default which are defined in the North American Credit Agreement,and restrictive covenants, including the following:
borrowings under each of •the domestic revolving loan facility and the Canadian revolving loan facility are subject to separateERC borrowing base calculations and may not exceedis 35% of the ERC offor all domestic or Canadian, as applicable,eligible core eligible asset pools plusand 55% of ERC of domestic or Canadian, as applicable,for all insolvency eligible asset pools, plus 75% of domestic or Canadian, as applicable, eligible accounts receivable;pools;
•the Company's consolidated total leverage ratio cannot exceed 2.753.50 to 1.0 as of the end of any fiscal quarter;
•the Company's consolidated senior secured leverage ratio cannot exceed 2.25 to 1.0 as of the end of any fiscal quarter;
•subject to no default or event of default, cash dividends and distributions during any fiscal year cannot exceed $20.0 million; and
subject to no default or event of default, stock repurchases during any fiscal year cannot exceed $100.0 million plus 50% of the prior year's net income;
permitted acquisitions during any fiscal year cannot exceed $250.0 million (with a $50.0 million per year sublimit for permitted acquisitions by non-loan parties);
indebtedness in the form of senior, unsecured convertible notes or other unsecured financings cannot exceed $750.0 million in the aggregate (without respect to the 2020 Notes (as defined below));
•the Company must maintain positive consolidated income from operations during any fiscal quarter;quarter (other than for the quarter ended March 31, 2023).
In preparation for reference rate reform on London Interbank Offered Rate ("LIBOR") borrowings and its official discontinuation after June 30, 2023, the Company executed an amendment to its North American Credit Agreement to allow for previously outstanding LIBOR borrowings and subsequent borrowings to use SOFR. SOFR is a broad measure of the cost of borrowing cash overnight collateralized by US Treasury securities. The amendment allows the Company the choice of either borrowing at Daily Simple SOFR plus 0.10% credit adjustment spread or Term SOFR plus 0.10% credit adjustment spread. As of June 30, 2023, all of the Company’s previously outstanding LIBOR borrowings under the North American Credit Agreement were converted to Daily Simple SOFR plus 0.10% credit adjustment spread.
restrictions on changes in control.United Kingdom ("UK") Revolving Credit Facility
PRA Group Europe Holding I S.a.r.l ("PRA Group Europe"), a wholly owned subsidiary of the Company, along with PRA Group UK Limited ("PRA UK") and the Company, as guarantors, are parties to a credit agreement (the "UK Credit Agreement") with the lenders party thereto and MUFG Bank, Ltd., London Branch, as the administrative agent (the "Administrative Agent").
The UK Credit Agreement consists of an $800.0 million revolving credit facility (subject to a borrowing base), and an accordion feature for up to $200.0 million in additional commitments, subject to certain conditions. Borrowings, which are available in U.S. dollars, euro and pounds sterling, accrue interest for the applicable term at SOFR or Sterling Overnight Index Average ("SONIA") or, in the case of euro borrowings, Euribor plus an applicable margin of 2.50% per annum plus a credit adjustment spread of 0.10%. If the consolidated senior secured leverage ratio is greater than 1.60 to 1.0, the applicable margin will increase to 2.75%. The UK Credit Agreement also bears an unused linehas a commitment fee of 0.375%0.30% per annum, payable quarterly in arrears. If the consolidated senior secured leverage ratio is greater than 1.60 to 1.0, the commitment fee increases to 0.35% per annum. The UK Credit Agreement matures on July 30, 2026. As of June 30, 2023, the unused portion of the UK Credit Agreement was $287.2 million. Considering borrowing base restrictions, as of June 30, 2023, the amount available to be drawn under the UK Credit Agreement was $56.0 million.
The UK Credit Agreement is secured by substantially all of the assets of PRA UK, all of the equity interests in PRA UK and PRA Group Europe, certain bank accounts of PRA Group Europe and certain intercompany loans extended by PRA Group Europe to PRA UK. The UK Credit Agreement contains events of default and restrictive covenants, including the following:
•the borrowing base equals the sum of up to: (i) 35% of the ERC of PRA UK’s eligible asset pools; plus (ii) 55% of PRA UK’s insolvency eligible asset pools; minus (iii) certain reserves to be established by the Administrative Agent;
•the Company's consolidated leverage ratio cannot exceed 3.50 to 1.0 as of the end of any fiscal quarter;

18
PRA Group, Inc.
Notes to Consolidated Financial Statements


•the Company's consolidated senior secured leverage ratio cannot exceed 2.25 to 1.0 as of the end of any fiscal quarter; and
•the Company must maintain positive consolidated income from operations during any fiscal quarter (other than for the quarter ended March 31, 2023).
European Revolving Credit Facility
The Company's wholly-owned subsidiary, PRA Group Europe Holding S.a.r.l. ("PRA Group Europe Holding"), and Term Loan
On October 23, 2014, European subsidiariesits Swiss Branch, PRA Group Europe Holding S.a.r.l. ("PRA Group Holding"), Luxembourg, Zug Branch (together, the "Borrowers"), along with certain of its affiliates and the Company, ("PRA Europe") entered intoas guarantors, are parties to a credit agreement with DNB Bank ASA for a Multicurrency Revolving Credit Facility (such agreement as later amended or modified, (the "European Credit Agreement"). Under with the terms of thelenders party thereto and DNB Bank ASA as facility agent and security agent (the "Agent").
The European Credit Agreement the credit facility includesprovides borrowings for an aggregate amount of approximately $1.2 billion€730.0 million (subject to the borrowing base), of and an uncommitted accordion feature for up to €500.0 million, subject to certain conditions. Borrowings, which 267.0 million EURO (approximately $315.4 million) is a term loan, accruesare available in euro, Norwegian krone, Danish krone, Swedish krona, and Polish zloty, accrue interest at the Interbank Offered Rate ("IBOR") plus 2.80%-3.90% under the revolving facility and 4.25%-4.50% under the term loan facility - 3.80% (as determined by the loan-to-valueestimated remaining collections ratio ("LTVERC Ratio") as defined in the European Credit Agreement), bearsbear an unused line fee, currently 1.26%1.085% per annum, ofor 35% of the margin, isare subject to a 0% floor, are payable monthly in arrears and matures on February 19, 2021. The European Credit Agreement also includesmature November 23, 2027. Additionally, the Company has a separate agreement with the Agent for an overdraft facility in the aggregate amount of $40.0 million (subject to the borrowing base), which accrues interest (per currency) at the daily rates as published by the facility agent,Agent, bears a facility line fee of 0.125% per quarter, payable quarterly in arrears and also matures February 19, 2021.November 23, 2027. As of SeptemberJune 30, 2017,2023, the unused portion of the European Credit Agreement (including the overdraft facility) was $566.2$358.5 million. Considering borrowing base restrictions and other covenants as of SeptemberJune 30, 2017,2023, the amount available to be drawn under the European Credit Agreement (including the overdraft facility) was $165.4$167.5 million.
The European Credit Agreement is secured by a first perfected security interest in all of the equity interests in certain operating subsidiaries of the Borrowers, certain intercompany loans and certain shareholder loans extended by the Company to the Borrowers. Further, the Company guarantees all obligations and liabilities under the European Credit Agreement. The European Credit Agreement is secured by the shares of most of the Company's European subsidiaries and all intercompany loan receivables in Europe. The European Credit Agreement also contains restrictive covenants and eventsevent of default which are defined in the European Credit Agreement,and restrictive covenants including the following:
•the LTVERC Ratio cannot exceed 75%45%;
•the gross interest-bearing debtCompany's consolidated total leverage ratio in Europe cannot exceed 3.253.50 to 1.0 as of the end of any fiscal quarter;
•the Company's consolidated senior secured leverage ratio cannot exceed 2.25 to 1.0 as of the end of any fiscal quarter;
•the Company must maintain positive consolidated income from operations at the end of any fiscal quarter (other than for the quarter ended March 31, 2023);
•interest bearing deposits in AK Nordic AB cannot exceed SEK 1,500,000,000;1.2 billion; and
•PRA Europe's cash collections must exceed 95% of PRA Europe's ERC for the same set of portfolios,meet certain thresholds, measured on a quarterly basis.
Convertible Senior Notes due 20202029
On August 13, 2013,September 22, 2021, the Company completed the private offering of $287.5$350.0 million in aggregate principal amount of its 3.00% Convertible5.00% Senior Notes due 2020October 1, 2029 (the "2020"2029 Notes"). The 20202029 Notes were issued pursuant to an Indenture dated August 13, 2013September 22, 2021 (the "2013"2021 Indenture"), between the Company and Wells FargoRegions Bank, National Association, as trustee. The 20132021 Indenture contains customary terms and covenants, including certain events of default after which the 20202029 Notes may be due and payable immediately. The 20202029 Notes are senior unsecured obligations of the Company.Company and are guaranteed on a senior unsecured basis by all of the Company's existing and future domestic restricted subsidiaries that guarantee the North American Credit Agreement, subject to certain exceptions. Interest on the 20202029 Notes is payable semi-annually, in arrears, on October 1 and April 1 of each year.
On or after October 1, 2024, the 2029 Notes may be redeemed, at the Company's option, in whole or in part at a price equal to 102.50% of the aggregate principal amount of the 2029 Notes being redeemed. The applicable redemption price changes if redeemed during the 12 months beginning October 1 of each year to 101.25% for 2025 and then 100% for 2026 and thereafter.
In addition, on or before October 1, 2024, the Company may redeem up to 40% of the aggregate principal amount of the 2029 Notes at a redemption price of 105.00% plus accrued and unpaid interest with the net cash proceeds of a public offering of common stock of the Company provided, that at least 60% in aggregate principal amount of the 2029 Notes remains
19
PRA Group, Inc.
Notes to Consolidated Financial Statements
outstanding immediately after the occurrence of such redemption and that such redemption will occur within 90 days of the date of the closing of such public offering.
In the event of a change of control, each holder will have the right to require the Company to repurchase all or any part of such holder's 2029 Notes at an offer price equal to 101% of the aggregate principal amount plus accrued and unpaid interest. If the Company sells assets under certain circumstances and does not use the proceeds for specified purposes, the Company will be required to make an offer to repurchase the 2029 Notes at 100% of their principal amount plus accrued and unpaid interest.
Senior Notes due 2028
On February 6, 2023, the Company completed the private offering of $400.0 million aggregate principal amount of its 8.375% Senior Notes due 2028 ("2028 Notes"). The 2028 Notes were issued pursuant to an Indenture dated February 6, 2023 (the "2023 Indenture"), between the Company and Regions Bank, as trustee. The 2023 Indenture contains customary terms and covenants, including certain events of default after which the 2028 Notes may be due and payable immediately. The 2028 Notes are senior unsecured obligations of the Company and are guaranteed on a senior unsecured basis by all of the Company's existing and future domestic restricted subsidiaries that guarantee the North American Credit Agreement, subject to certain exceptions. Interest on the 2028 Notes is payable semi-annually, in arrears, on February 1 and August 1 of each year, beginning on February 1, 2014. Prioryear. Substantially all of the net proceeds received from the 2028 Notes were used to February 1, 2020,retire the 20202023 Notes will be convertible only upon(as defined below). The Company used the occurrenceremainder of specified events. the net proceeds to repay a portion of its outstanding borrowings under the domestic revolving credit facility under the North America Credit Agreement.
On or after February 1, 2020,2025, the 20202028 Notes may be redeemed at the Company's option in whole or in part at a price equal to 104.188% of the aggregate principal amount of the 2028 Notes being redeemed. The applicable redemption price changes if redeemed during the 12 months beginning February 1 of each year to 102.094% for 2026 and then 100% for 2027 and thereafter.
In addition, on or before February 1, 2025, the Company may redeem up to an aggregate of 40% of the aggregate principal amount of the 2028 Notes at a redemption price of 108.375% plus accrued and unpaid interest with the net cash proceeds of a public offering of common stock of the Company, provided that at least 60% in aggregate principal amount of the 2028 Notes remains outstanding immediately after the occurrence of such redemption and that such redemption will be convertible at any time. The Company does notoccur within 90 days of the date of the closing of such public offering.
In the event of a change of control, each holder will have the right to redeemrequire the 2020Company to repurchase all or any part of such holder's 2028 Notes priorat an offer price equal to maturity. As101% of September 30, 2017 and December 31, 2016, none of the conditions allowing holders of the 2020 Notes to convert their notes had occurred.
The conversion rate for the 2020 Notes is initially 15.2172 shares per $1,000 principal amount of 2020 Notes, which is equivalent to an initial conversion price of approximately $65.72 per share of the Company's common stock, and is subject to adjustment in certain circumstances pursuant to the 2013 Indenture. Upon conversion, holders of the 2020 Notes will receive cash, shares of the Company's common stock or a combination of cash and shares of the Company's common stock, at the Company's election. The Company's current intent is to settle conversions through combination settlement (i.e., the 2020 Notes would be convertedinto cash up to the aggregate principal amount plus accrued and sharesunpaid interest. If the Company sells assets under certain circumstances and does not use the proceeds for specified purposes, the Company will be required to make an offer to repurchase the 2028 Notes at 100% of their principal amount plus accrued and unpaid interest.
During the three months ended June 30, 2023, the Company repurchased $2.0 million in aggregate principal amount of the Company's common stock or a combination of cash and shares of the Company's common stock, at the Company's election, for the remainder). As a result and in accordance with authoritative guidance related to derivatives and hedging and earnings per share, only the conversion spread is included in the diluted earnings per share calculation, if dilutive. Under such method, the settlement of the conversion spread has a dilutive effect when the average share price of the Company's common stock during any quarter exceeds $65.72.2028 Notes.
The Company determined that the fair value of the 2020 Notes at the date of issuance was approximately $255.3 million, and designated the residual value of approximately $32.2 million as the equity component. Additionally, the Company allocated approximately $7.3 million of the $8.2 million 2020 Notes issuance cost as debt issuance cost and the remaining $0.9 million as equity issuance cost.
Convertible Senior Notes due 20232025
On May 26, 2017,August 27, 2020, the Company completed the private offering of $345.0$300.0 million in aggregate principal amount of its 3.50% Convertible7.375% Senior Notes due 2023September 1, 2025 (the "2023"2025 Notes" and, together with the 20202029 Notes and the 2028 Notes, the "Notes""Senior Notes"). The 20232025 Notes were issued pursuant to an Indenture dated May 26, 2017August 27, 2020 (the "2017"2020 Indenture"), between the Company and Regions Bank, as trustee. The 20172020 Indenture contains customary terms and covenants, including certain events of default after which the 20232025 Notes may be due and payable immediately. The 2025 Notes are senior unsecured obligations of the Company and are guaranteed on a senior unsecured basis by all of the Company's existing and future domestic restricted subsidiaries that guarantee the North American Credit Agreement, subject to certain exceptions. Interest on the 2025 Notes is payable semi-annually, in arrears, on March 1 and September 1 of each year.
The 2025 Notes may be redeemed, at the Company's option, in whole or in part, at a price equal to 103.688% of the aggregate principal amount of the 2025 Notes being redeemed. The applicable redemption price changes if redeemed during the 12 months beginning September 1 of each year to 101.844% for 2023 and then 100% for 2024 and thereafter.
In the event of a change of control, each holder will have the right to require the Company to repurchase all or any part of such holder's 2025 Notes at a price equal to 101% of their aggregate principal amount, plus accrued and unpaid interest. If the Company sells assets under certain circumstances and does not use the proceeds for specified purposes, the Company will be required to make an offer to repurchase the 2025 Notes at 100% of their principal amount plus accrued and unpaid interest.

20
PRA Group, Inc.
Notes to Consolidated Financial Statements


due and payable immediately. TheDuring the three months ended June 30, 2023, Notes are senior unsecured obligationsthe Company repurchased $2.0 million in aggregate principal amount of the Company. Interest on2025 Notes.
Convertible Senior Notes due 2023
The Company used substantially all of the 2023net proceeds from the issuance of the 2028 Notes is payable semi-annually, in arrears,to retire the $345.0 million aggregate principal amount of its 3.50% Convertible Senior Notes at their maturity on June 1, and December 1 of each year, beginning on December 1, 2017. Prior to March 1, 2023 the 2023 Notes will be convertible only upon the occurrence of specified events. On or after March 1, 2023, the 2023 Notes will be convertible at any time. The Company has the right, at its election, to redeem all or any part of the outstanding notes at any time on or after June 1, 2021 for cash, but only if the last reported sale price (as defined in the 2017 Indenture) exceeds 130% of the conversion price on each of at least 20 trading days during the 30 consecutive trading days ending on and including the trading day immediately before the date the Company sends the related redemption notice. As of September 30, 2017, none of the conditions allowing holders of the 2023 Notes to convert their notes had occurred.
The conversion rate for the 2023 Notes is initially 21.6275 shares per $1,000 principal amount of 2023 Notes, which is equivalent to an initial conversion price of approximately $46.24 per share of the Company's common stock, and is subject to adjustment in certain circumstances pursuant to the 2017 Indenture. Upon conversion, holders of the 2023 Notes will receive cash, shares of the Company's common stock or a combination of cash and shares of the Company's common stock, at the Company's election. The Company's current intent is to settle conversions through combination settlement (i.e., the 2023 Notes would be convertedinto cash up to the aggregate principal amount, and shares of the Company's common stock or a combination of cash and shares of the Company's common stock, at the Company's election, for the remainder)(the "2023 Notes"). As a result and in accordance with authoritative guidance related to derivatives and hedging and earnings per share, only the conversion spread is included in the diluted earnings per share calculation, if dilutive. Under such method, the settlement of the conversion spread has a dilutive effect when the average share price of the Company's common stock during any quarter exceeds $46.24.
The Company determined that the fair value of the 2023 Notes at the date of issuance was approximately $298.8 million, and designated the residual value of approximately $46.2 million as the equity component. Additionally, the Company allocated approximately $8.3 million of the $9.6 million 2023 Notes issuance cost as debt issuance cost and the remaining $1.3 million as equity issuance cost.
The balances of the liability and equity components of the Notes outstanding were as follows as of the dates indicated (amounts in thousands):
 September 30, 2017 December 31, 2016
Liability component - principal amount$632,500
 $287,500
Unamortized debt discount(58,360) (17,930)
Liability component - net carrying amount$574,140
 $269,570
Equity component$76,216
 $31,306
The debt discount is being amortized into interest expense over the remaining life of the 2020 Notes and the 2023 Notes using the effective interest rate, which is 4.92% and 6.20%, respectively.
Interest expense related to the 2023 Notes for the three and six months ended June 30, 2023 and 2022, was as follows for the periods indicated (amounts in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Interest expense - stated coupon rate$2,013 $3,019 $5,032 $6,038 
Interest expense - amortization of debt issuance costs311 435 748 855 
Total interest expense - convertible notes$2,324 $3,454 $5,780 $6,893 
7. Derivatives:
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Interest expense - stated coupon rate$5,175
 $2,156
 $10,695
 $6,468
Interest expense - amortization of debt discount2,796
 1,127
 5,760
 3,336
Total interest expense - convertible senior notes$7,971

$3,283
 $16,455
 $9,804
5. GoodwillThe Company periodically enters into derivative financial instruments; typically interest rate swap agreements, interest rate caps and Intangible Assets, net:
In connectionforeign currency contracts, to reduce its exposure to fluctuations in interest rates on variable-rate debt and foreign currency exchange rates. The Company does not utilize derivative financial instruments with a level of complexity or with a risk greater than the exposure to be managed, nor does it enter into or hold derivatives for trading or speculative purposes. The Company periodically reviews the creditworthiness of the counterparty to assess the counterparty's ability to honor its obligations. Counterparty default would expose the Company to fluctuations in interest and currency rates. Derivative financial instruments are recognized at fair value in the Company's business acquisitions,Consolidated Balance Sheets.
The following table summarizes the Company acquired certain tangible and intangible assets. Intangible assets resulting from these acquisitions include client and customer relationships, non-compete agreements, trademarks and technology. The Company performs an annual reviewfair value of goodwillderivative instruments as of October 1June 30, 2023 and December 31, 2022 (amounts in thousands):
June 30, 2023December 31, 2022
Balance Sheet LocationFair ValueBalance Sheet LocationFair Value
Derivatives designated as hedging instruments:
Interest rate contractsOther assets$39,795 Other assets$37,305 
Interest rate contractsOther liabilities540 Other liabilities— 
Derivatives not designated as hedging instruments:
Foreign currency contractsOther assets4,966 Other assets487 
Foreign currency contractsOther liabilities8,576 Other liabilities19,120 
Derivatives Designated as Hedging Instruments:
Changes in fair value of each year or more frequently if indicatorsderivative contracts designated as cash flow hedging instruments are recognized in other comprehensive income ("OCI"). As of impairment exist.June 30, 2023 and December 31, 2022, the notional amount of interest rate contracts designated as cash flow hedging instruments was $729.5 million and $719.7 million, respectively. Derivatives designated as cash flow hedging instruments were evaluated and remained highly effective at June 30, 2023 and have remaining terms of 6 months to three years. The Company estimates that approximately $18.3 million of net derivative gain included in OCI will be reclassified into earnings within the next 12 months.






21
PRA Group, Inc.
Notes to Consolidated Financial Statements


The following tables summarize the effects of derivatives designated as cash flow hedging instruments on the Company's Consolidated Financial Statements for the three and six months ended June 30, 2023 and 2022 (amounts in thousands):
Gain/(loss) recognized in OCI, net of tax
Three Months Ended June 30,Six Months Ended June 30,
Derivatives designated as cash flow hedging instruments2023202220232022
Interest rate contracts$10,771 $4,713 $10,142 $21,123 
Gain/(loss) reclassified from OCI into income
Three Months Ended June 30,Six Months Ended June 30,
Location of gain/(loss) reclassified from OCI into income2023202220232022
Interest expense, net$6,670 $(1,468)$12,168 $(4,202)
During the three months ended June 30, 2023, the Company elected certain of the optional expedients in accordance with ASU 2021-01, "Reference Rate Reform (Topic 848): Overall" ("ASU 2021-01") to maintain cash flow hedge accounting for interest contracts with a combined notional amount of $300.0 million.
Derivatives Not Designated as Hedging Instruments:
The Company enters into foreign currency contracts to economically hedge foreign currency re-measurement exposure related to certain balances denominated in currencies other than the functional currency of the entity. Changes in fair value of derivative contracts not designated as hedging instruments are recognized in earnings. As of June 30, 2023 and December 31, 2022, the notional amount of foreign currency contracts was $1,693.0 million and $460.8 million, respectively.
The following table representssummarizes the changes in goodwilleffects of derivatives not designated as hedging instruments on the Company's Consolidated Income Statements for the three and ninesix months ended SeptemberJune 30, 20172023 and 20162022 (amounts in thousands):
Gain/(loss) recognized in income
Three Months Ended June 30,
Derivatives not designated as hedging instrumentsLocation of gain/(loss) recognized in income20232022
Foreign currency contractsForeign exchange gain/(loss), net(7,589)32,859 
Foreign currency contractsInterest expense, net631 (619)
Gain/(loss) recognized in income
Six Months Ended June 30,
Derivatives not designated as hedging instrumentsLocation of gain/(loss) recognized in income20232022
Foreign currency contractsForeign exchange gain/(loss), net$(15,287)$39,352 
Foreign currency contractsInterest expense, net1,153 (951)
8. Fair Value:
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Balance at beginning of period:       
Goodwill$516,165
 $550,734
 $506,308
 $501,553
Accumulated impairment loss—
 (6,397) (6,397) (6,397)
 516,165
 544,337
 499,911
 495,156
Changes:       
Acquisitions—
 1,193
 —
 28,711
Foreign currency translation adjustment22,172
 14,975
 38,426
 36,638
Net change in goodwill22,172
 16,168
 38,426
 65,349
        
Goodwill538,337
 566,902
 538,337
 566,902
Accumulated impairment loss—
 (6,397) —
 (6,397)
Balance at end of period:$538,337
 $560,505
 $538,337
 $560,505
The change in accumulated impairment loss during the nine months ended September 30, 2017, is related to the June 2017 sale of PRA Location Services, LLCAs defined by ASC Topic 820, "Fair Value Measurement and Disclosures" ("PLS"ASC 820"), fair value is the goodwillprice that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 requires the consideration of which was fully impaired during 2013.
The $1.2 million addition to goodwill during the three months ended September 30, 2016, was attributable to an immaterial acquisition. The goodwill recognized from this acquisition is expected to be deductible for tax purposes.
The $28.7 million addition to goodwill during the nine months ended September 30, 2016, was mainly attributable to the acquisition of DTP S.A. ("DTP") during the second quarter of 2016 and the acquisition of Recovery Management Systems Corporation ("RMSC")different input levels in the first quarterdetermination of 2016. The goodwill recognized from the DTP acquisition isfair value, as follows:
•Level 1: Quoted prices in active markets for identical assets and liabilities.
•Level 2: Observable inputs other than Level 1 quoted prices, such as quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not expected to be deductibleactive, and model-based valuation techniques for tax purposes while the goodwill recognized from the RMSC acquisition is expected to be deductible for tax purposes.
6. Income Taxes:
The Company follows the guidance of FASB ASC Topic 740 "Income Taxes" ("ASC 740") as it relates to the provision for income taxes and uncertainty in income taxes. The guidance prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.
For tax purposes, the Company utilized the cost recovery method of accounting through December 31, 2016. Under the cost recovery method, collections on finance receivableswhich all significant assumptions are applied first to principal to reduce the finance receivables balance to zero before taxable income is recognized. The Internal Revenue Service ("IRS") examined the Company's 2005 through 2012 tax returns and asserted that tax revenue recognition using the cost recovery method did not clearly reflect taxable income and therefore issued Notices of Deficiency to the Company for tax years ended December 31, 2005 through 2012 (the "Notices"). In response to the Notices, the Company filed petitionsobservable in the U.S. Tax Court (the “Tax Court”) challenging the deficienciesmarket.
•Level 3: Unobservable inputs that are supported by little or no market activity. Level 3 assets and the Tax Court set the trial to begin on May 15, 2017. On May 10, 2017, the Company reached a settlement with the IRS in regards to the Notices. Under the settlement, both parties agreed that no amounts were due for years 2005 through 2012 and the Tax Court entered decisions to that effect on June 22, 2017. Also, under the settlement, the Company will utilize a new tax accounting method to recognize net finance receivables revenue effective with tax year 2017. Under the new method, a portion of the annual collections amortize principal and the remaining portionliabilities include financial instruments whose value is taxable income. The Company will not be required to pay any interestdetermined using pricing models, discounted cash flow methodologies, or penalties related to the prior periods. The deferred tax liability related to the difference in timing between the new method and the cost recovery method will be incorporated evenly into the Company’s tax filings over four years with no associated interest.
At September 30, 2017, the tax years subject to examination by the major federal, state and international taxing jurisdictions are 2013 and subsequent years.
The Company intends for predominantly all foreign earnings to be indefinitely reinvested in its foreign operations. If foreign earnings were repatriated, the Company would need to accrue and pay taxes, although foreign tax credits may be available to partially reduce U.S. income taxes. The amount of cash on hand related to foreign operations with indefinitely reinvested earnings was $95.3 million and $73.6 million as of September 30, 2017 and December 31, 2016, respectively.

22
PRA Group, Inc.
Notes to Consolidated Financial Statements

similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.
The level in the fair value hierarchy within which a fair value measurement in its entirety falls is based on the lowest level input that is significant to the fair value measurement in its entirety.
Financial Instruments Not Carried at Fair Value
In accordance with the disclosure requirements of ASC Topic 825, "Financial Instruments" ("ASC 825"), the table below summarizes fair value estimates for the Company's financial instruments that are not carried at fair value. The total of the fair values presented does not represent, and should not be construed to represent, the underlying value of the Company.
The carrying amounts in the table below were recorded in the Company's Consolidated Balance Sheets at June 30, 2023 and December 31, 2022 (amounts in thousands):
June 30, 2023December 31, 2022
Carrying
Amount		Estimated
Fair Value		Carrying
Amount		Estimated
Fair Value
Financial assets:
Cash and cash equivalents$111,375 $111,375 $83,376 $83,376 
Finance receivables, net3,424,548 3,183,414 3,295,008 3,167,813 
Financial liabilities:
Interest-bearing deposits99,318 99,318 112,992 112,992 
Revolving lines of credit1,262,277 1,262,277 1,060,251 1,060,251 
Term loan445,000 445,000 450,000 450,000 
Senior Notes1,046,000 913,620 650,000 580,433 
Convertible Notes— — 345,000 341,926 
Disclosure of the estimated fair values of financial instruments often requires the use of estimates. The carrying amount and estimates of the fair value of the Company's debt obligations outlined above do not include any related debt issuance costs associated with the debt obligations. The Company uses the following methods and assumptions to estimate the fair value of financial instruments:
Cash equivalents: The carrying amount approximates fair value due to the short-term nature of the instruments and the observable quoted prices for identical assets in active markets. Accordingly, the Company uses Level 1 inputs for its fair value estimates.
Finance receivables, net: The Company estimates the fair value of these receivables using proprietary pricing models that the Company utilizes to make portfolio acquisition decisions. Accordingly, the Company's fair value estimates use Level 3 inputs as there is little observable market data available and management is required to use significant judgment in its estimates.
Interest-bearing deposits: The carrying amount approximates fair value due to the short-term nature of the deposits and the observable quoted prices for similar instruments in active markets. Accordingly, the Company uses Level 2 inputs for its fair value estimates.
Revolving lines of credit: The carrying amount approximates fair value due to the short-term nature of the interest rate periods and the observable quoted prices for similar instruments in active markets. Accordingly, the Company uses Level 2 inputs for its fair value estimate.
Term loan: The carrying amount approximates fair value due to the short-term nature of the interest rate periods and the observable quoted prices for similar instruments in active markets. Accordingly, the Company uses Level 2 inputs for its fair value estimate.
Senior Notes and Convertible Notes: The fair value estimates for the Senior Notes and Convertible Notes incorporate quoted market prices obtained from secondary market broker quotes, which were derived from a variety of inputs including client orders, information from their pricing vendors, modeling software and actual trading prices when they occur. Accordingly, the Company uses Level 2 inputs for its fair value estimates.

23
PRA Group, Inc.
Notes to Consolidated Financial Statements

Financial Instruments Carried at Fair Value
7.The carrying amounts in the following tables were measured at fair value on a recurring basis in the Company's Consolidated Balance Sheets at June 30, 2023 and December 31, 2022 (amounts in thousands):
Fair Value Measurements as of June 30, 2023
Level 1Level 2Level 3Total
Assets:
Government securities$62,740 $— $— $62,740 
Derivative contracts (recorded in Other assets)— 44,761 — 44,761 
Liabilities:
Derivative contracts (recorded in Other liabilities)— 9,116 — 9,116 
Fair Value Measurements as of December 31, 2022
Level 1Level 2Level 3Total
Assets:
Government securities$66,813 $— $— $66,813 
Derivative contracts (recorded in Other assets)— 37,792 — 37,792 
Liabilities:
Derivative contracts (recorded in Other liabilities)— 19,120 — 19,120 
Government securities: Fair value of the Company's investments in government securities is estimated using quoted market prices. Accordingly, the Company uses Level 1 inputs.
Derivative contracts: Fair value of derivative contracts is estimated using industry standard valuation models. These models project future cash flows and discount the future amounts to a present value using market-based observable inputs, including interest rate curves and other factors. Accordingly, the Company uses Level 2 inputs for its fair value estimates.
Investments measured using net asset value ("NAV")
Private equity funds: This class of investments consists of private equity funds that invest primarily in loans and securities, including single-family residential debt; corporate debt products; and financially-oriented, real-estate-rich and other operating companies in the Americas, Western Europe and Japan. These investments are subject to certain restrictions regarding transfers and withdrawals. The investments cannot be redeemed with the funds. Instead, the nature of the investments in this class is that distributions are received through the liquidation of the underlying assets of the fund. The investments are expected to be returned through distributions as a result of liquidation of the funds' underlying assets over one to five years. The fair value of these private equity funds following the application of the NAV practical expedient was $3.4 million and $4.4 million as of June 30, 2023 and December 31, 2022, respectively.
9. Accumulated Other Comprehensive Loss:
Reclassifications out of accumulated other comprehensive loss for the three and six months ended June 30, 2023 and 2022, were as follows (amounts in thousands):
Three Months Ended June 30,
Gains/(losses) on cash flow hedges20232022Location in the Consolidated Income Statement
Interest rate swaps$(6,670)$(1,468)Interest expense, net
Income tax effect of item above1,618 344 Income tax expense/(benefit)
Total losses on cash flow hedges$(5,052)$(1,124)
Six Months Ended June 30,
Gains/(losses) on cash flow hedges20232022Location in the Consolidated Income Statement
Interest rate swaps$(12,168)$(4,202)Interest expense, net
Income tax effect of item above2,914 908 Income tax expense/(benefit)
Total losses on cash flow hedges$(9,254)$(3,294)
24
PRA Group, Inc.
Notes to Consolidated Financial Statements
The following tables represent the changes in accumulated other comprehensive loss by component, after tax, for the three and six months ended June 30, 2023 and 2022 (amounts in thousands):
Three Months Ended June 30, 2023
Debt SecuritiesCash FlowCurrency TranslationAccumulated Other
Available-for-saleHedgesAdjustments
Comprehensive Loss (1)
Balance at beginning of period$(109)$22,973 $(379,594)$(356,730)
Other comprehensive gain/(loss) before reclassifications(80)10,771 3,091 13,782 
Reclassifications, net— (5,052)— (5,052)
Net current period other comprehensive gain/(loss)(80)5,719 3,091 8,730 
Balance at end of period$(189)$28,692 $(376,503)$(348,000)
Three Months Ended June 30, 2022
Debt SecuritiesCash FlowCurrency TranslationAccumulated Other
Available-for-saleHedgesAdjustments
Comprehensive Loss (1)
Balance at beginning of period$(381)$13,209 $(256,537)$(243,709)
Other comprehensive gain/(loss) before reclassifications(242)4,713 (109,707)(105,236)
Reclassifications, net— 1,124 — 1,124 
Net current period other comprehensive gain/(loss)(242)5,837 (109,707)(104,112)
Balance at end of period$(623)$19,046 $(366,244)$(347,821)
(1) Net of deferred taxes for unrealized (gains)/losses from cash flow hedges of $(1.9) million and $(1.4) million for the three months ended June 30, 2023 and 2022, respectively.
Six Months Ended June 30, 2023
Debt SecuritiesCash FlowCurrency TranslationAccumulated Other
Available-for-saleHedgesAdjustments
Comprehensive Loss (1)
Balance at beginning of period$(237)$27,804 $(375,493)$(347,926)
Other comprehensive gain/(loss) before reclassifications48 10,142 (1,010)9,180 
Reclassifications, net— (9,254)— (9,254)
Net current period other comprehensive gain/(loss)48 888 (1,010)(74)
Balance at end of period$(189)$28,692 $(376,503)$(348,000)
Six Months Ended June 30, 2022
Debt SecuritiesCash FlowCurrency TranslationAccumulated Other
Available-for-saleHedgesAdjustments
Comprehensive Loss (1)
Balance at beginning of period$(221)$(5,371)$(261,317)$(266,909)
Other comprehensive gain/(loss) before reclassifications(402)21,123 (104,927)(84,206)
Reclassifications, net— 3,294 — 3,294 
Net current period other comprehensive gain/(loss)(402)24,417 (104,927)(80,912)
Balance at end of period$(623)$19,046 $(366,244)$(347,821)
(1) Net of deferred taxes for unrealized (gains)/losses from cash flow hedges of $(9.5) million and $(2.6) million for the six months ended June 30, 2023 and 2022, respectively.
10. Earnings per Share:
Basic earnings per share ("EPS") areEPS is computed by dividing net income available to common stockholders of PRA Group, Inc. by weighted average common shares outstanding. Diluted EPS areis computed using the same components as basic EPS, with the denominator adjusted for the dilutive effect of the conversion spread of the Convertible Notes and nonvested share awards, if they are
25
PRA Group, Inc.
Notes to Consolidated Financial Statements
dilutive. ForThere were no dilutive effects caused by the Convertible Notes only the conversion spread is included in the diluted EPS calculation, if dilutive. Under such method, the settlement of the conversion spread has a dilutive effect when the average share price of the Company's common stock during any quarter exceeds $65.72 for the 2020 Notes or $46.24 for the 2023 Notes, neither of which occurred during the respective periods from which the Notes were issuedsince issuance through September 30, 2017.their retirement on June 1, 2023. Share-based awards that are contingent upon the attainment of performance goals are included in the computation of diluted EPS if the effect is dilutive. The dilutive effect of nonvested shares is computed using the treasury stock method, which assumes any proceeds that could be obtained upon the vesting of nonvested shares would be used to purchase common shares at the average market price for the period. The assumed proceeds include
On February 25, 2022, the tax benefit that would be realized upon assumed exercise.Company's Board of Directors approved a share repurchase program under which the Company is authorized to repurchase up to $150.0 million of its common stock. We did not repurchase any common stock during the six months ended June 30, 2023. As of June 30, 2023, the Company had $67.7 million remaining for share repurchases.
The following table provides a reconciliation between the computation of basic EPSEPS and diluted EPS for the three and ninesix months ended SeptemberJune 30, 20172023 and 20162022 (amounts in thousands, except per share amounts):
 For the Three Months Ended September 30,
 2017 2016
 Net income attributable to PRA Group, Inc. Weighted
Average
Common Shares		 EPS Net income attributable to PRA Group, Inc. Weighted
Average
Common Shares		 EPS
Basic EPS$15,555
 45,168
 $0.34
 $34,306
 46,343
 $0.74
Dilutive effect of nonvested share awards  118
 —
   91
 —
Diluted EPS$15,555
 45,286
 $0.34
 $34,306
 46,434
 $0.74
            
 For the Nine Months Ended September 30,
 2017 2016
 Net income attributable to PRA Group, Inc. Weighted
Average
Common Shares		 EPS Net income attributable to PRA Group, Inc. Weighted
Average
Common Shares		 EPS
Basic EPS$75,395
 45,838
 $1.64
 $102,745
 46,307
 $2.22
Dilutive effect of nonvested share awards  153
 —
   96
 (0.01)
Diluted EPS$75,395
 45,991
 $1.64
 $102,745
 46,403
 $2.21
Three Months Ended June 30,
20232022
Net Loss Attributable to PRA Group, Inc.Weighted
Average
Common Shares		EPSNet Income Attributable to PRA Group, Inc.Weighted
Average
Common Shares		EPS
Basic EPS$(3,804)39,190 $(0.10)$36,484 39,779 $0.92 
Dilutive effect of nonvested share awards— — 121 (0.01)
Diluted EPS$(3,804)39,190 $(0.10)$36,484 39,900 $0.91 
Six Months Ended June 30,
20232022
Net Loss Attributable to PRA Group, Inc.Weighted
Average
Common Shares		EPSNet Income Attributable to PRA Group, Inc.Weighted
Average
Common Shares		EPS
Basic EPS$(62,433)39,111 $(1.60)$76,456 40,278 $1.90 
Dilutive effect of nonvested share awards— — 324 (0.02)
Diluted EPS$(62,433)39,111 $(1.60)$76,456 40,602 $1.88 
There were no antidilutive options outstanding, antidilutive or otherwise, as of June 30, 2023 and 2022.
11. Income Taxes:
The Company accounts for income taxes in accordance with Financial Accounting Standards Board ("FASB") ASC Topic 740 "Income Taxes" ("ASC 740") as it relates to the provision for income taxes and uncertainty in income taxes. The guidance prescribes a recognition threshold and measurement attribute for the threefinancial statement recognition and nine months ended Septembermeasurement of a tax position taken or expected to be taken in a tax return.
At June 30, 20172023, the tax years subject to examination by the major federal, state and 2016.international taxing jurisdictions are 2014 and subsequent years.
The Company intends for predominantly all international earnings to be indefinitely reinvested in its international operations; therefore, recording deferred tax liabilities for such unremitted earnings is not required. If international earnings were repatriated, the Company may need to accrue and pay taxes, although foreign tax credits and exemptions may be available to partially reduce U.S. income taxes. The amount of cash on hand related to international operations with indefinitely reinvested earnings was $83.2 million and $75.3 million as of June 30, 2023 and December 31, 2022, respectively.
8.
12. Commitments and Contingencies:
Employment Agreements:
The Company has entered into employment agreements with allcertain of its current and former U.S. executive officers, and with several members of its U.S. senior management group.which expire on December 31, 2023. Such agreements provide for base salary payments as well as potential discretionary bonuses that are based onconsider the attainment of a combination ofCompany’s overall performance against its short and long-term financial and management goals.strategic objectives. The agreements also contain customary confidentiality and non-compete provisions. At SeptemberJune 30, 2017, estimated2023, estimated future
26
PRA Group, Inc.
Notes to Consolidated Financial Statements
compensation under these agreements was approximately $11.8 $4.4 million. The agreements also contain confidentiality and non-compete provisions. Outside the U.S., the Company has entered into employment agreements are in place with certain employees pursuant to local country regulations. Generally, these agreements do not have expiration dates and thereforedates. As a result, it is impractical to estimate the amount of future compensation under these agreements. Accordingly, the future compensation under these agreements is not included in the $11.8$4.4 million total above.
Leases:
The Company is party to various operating leases with respect to its facilities and equipment. The future minimum lease payments at September 30, 2017 totaled approximately $43.8 million.

PRA Group, Inc.
Notes to Consolidated Financial Statements


tal above.
Forward Flow Agreements:
The Company is party to several forward flow agreements that allow for the purchase of nonperforming loans at pre-establishedpre-established prices. The maximum remaining amount to be purchased under forward flow agreements at SeptemberJune 30, 20172023 was approximately $413.6$557.7 million.
Finance Receivables:
Certain agreements for the purchase of finance receivables portfolios contain provisions that may, in limited circumstances, require the Company to refund a portion or all of the collections subsequently received by the Company on particular accounts. The potential refunds as of the balance sheet date are not considered to be significant.
Litigation and Regulatory Matters:
The Company isand its subsidiaries are from time to time subject to a variety of routine legal and regulatory claims, inquiries and proceedings and regulatory matters, most of which are incidental to the ordinary course of its business. The Company initiates lawsuits against customers and is occasionally countersued by them in such actions. Also, customers, either individually, as members of a class action, or through a governmental entity on behalf of customers, may initiate litigation against the Company in which they allege that the Company has 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 the Company. Additionally, the Company receives subpoenas and other requests or demands for information from regulators or governmental authorities who are investigating the Company's debt collection activities.
The Company accrues for potential liability arising from legal proceedings and regulatory matters when it is probable that such liability has been incurred and the amount of the loss can be reasonably estimated. This determination is based upon currently available information for those proceedings in which the Company is involved, taking into account the Company's best estimate of such losses for those cases for which such estimates can be made. The Company's estimate involves significant judgment given the varying stages of the proceedings (including the fact that many of them are currently in preliminary stages), the number of unresolved issues in many of the proceedings (including issues regarding class certification and the scope of many of the claims), and the related uncertainty of the potential outcomes of these proceedings. In making determinations of the likely outcome of pending litigation, the Company considers many factors, including, but not limited to, the nature of the claims,claim, the Company's experience with similar types of claims, the jurisdiction in which the matter is filed, input from outside legal counsel, the likelihood of resolving the matter through alternative mechanisms, the matter's current status and the damages sought or demands made. Accordingly, the Company's estimate will change from time to time, and actual losses could be more than the current estimate.
The Company believes that the estimate of the aggregate range of reasonably possible losses in excess of the amount accrued for its legal proceedings outstanding at SeptemberJune 30, 20172023, where the range of loss can be estimated, was not material.
In certain legal proceedings, the Company may have recourse to insurance or third-party contractual indemnities to cover all or portions of its litigation expenses, judgments, or settlements. Loss estimates and accruals for potential liability related to legal proceedings are typically exclusive of potential recoveries, if any, under the Company's insurance policies or third-party indemnities. The Company had not recorded
As of June 30, 2023, there were no material developments in any potential recoveries underof the legal proceedings disclosed in the Company's insurance policies2022 Form 10-K, or third-party indemnities as of September 30, 2017.
The matters described below fall outside of the normal parameters of the Company's routine legal proceedings.
Multi-State Investigation
The Company previously received Civil Investigative Demands from multiple state Attorneys General offices broadly relating to its debt collection practices in the U.S. The Company, which has fully cooperated with the investigation, has discussed potential resolution of the investigation with this coalition of Attorneys General, which could include penalties, restitution and/or the adoption of new practices and controls in the conduct of the Company's business. In these discussions, the state Attorneys General offices have taken positions with which the Company disagrees. If the Company is unable to resolve its differences with this multi-state coalition, it is possible that individual state Attorneys General offices may file claims against the Company.
Internal Revenue Service Audit
The IRS examined the Company's 2005 through 2012 tax returns and asserted that tax revenue recognition using the cost recovery method did not clearly reflect taxable income and therefore issued Notices of Deficiency to the Company for tax years ended DecemberMarch 31, 2005 through 2012 (the "Notices"). In response to the Notices, the Company filed petitions in the Tax Court challenging the deficiencies and the Tax Court set the trial to begin on May 15, 2017. On May 10, 2017, the Company reached a settlement with the IRS in regards to the Notices. Under the settlement, both parties agreed that no amounts were due for years 2005 through 2012 and the Tax Court entered decisions to that effect on June 22, 2017. Also, under the settlement, the Company

PRA Group, Inc.
Notes to Consolidated Financial Statements


agreed to utilize a new tax accounting method to recognize net finance receivables revenue effective with tax year 2017. Under the new method, a portion of the annual collections will amortize principal and the remaining portion will be considered taxable income. The Company will not be required to pay any interest or penalties related to the prior periods. The deferred tax liability related to the difference in timing between the new method and the prior method will be incorporated evenly into the Company’s tax filings over four years with no associated interest.
9. Fair Value:
As defined by FASB ASC Topic 820, "Fair Value Measurements and Disclosures" ("ASC 820"), fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 also requires the consideration of differing levels of inputs in the determination of fair values.
Those levels of input are summarized as follows:
Level 1: Quoted prices in active markets for identical assets and liabilities.
Level 2: Observable inputs other than Level 1 quoted prices, such as quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.
Level 3: Unobservable inputs that are supported by little or no market activity. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques as well as instruments for which the determination of fair value requires significant management judgment or estimation.
The level in the fair value hierarchy within which a fair value measurement in its entirety falls is based on the lowest level input that is significant to the fair value measurement in its entirety.
Financial Instruments Not Required To Be Carried at Fair Value
In accordance with the disclosure requirements of FASB ASC Topic 825, "Financial Instruments" ("ASC 825"), the table below summarizes fair value estimates for the Company's financial instruments not required to be carried at fair value. The total of the fair value calculations presented does not represent, and should not be construed to represent, the underlying value of the Company.
The carrying amounts of the financial instruments in the following table are recorded in the consolidated balance sheets at September 30, 2017 and December 31, 2016 (amounts in thousands):
 September 30, 2017 December 31, 2016
 Carrying
Amount		 Estimated
Fair Value		 Carrying
Amount		 Estimated
Fair Value
Financial assets:       
Cash and cash equivalents$113,754
 $113,754
 $94,287
 $94,287
Held-to-maturity investments57,031
 42,559
 51,407
 55,554
Other investments14,712
 9,709
 14,998
 12,573
Finance receivables, net2,577,831
 2,884,171
 2,307,969
 2,708,582
Financial liabilities:       
Interest-bearing deposits96,395
 96,395
 76,113
 76,113
Revolving lines of credit649,190
 649,190
 1,096,868
 1,096,868
Term loans762,902
 762,902
 430,764
 430,764
Convertible senior notes574,140
 579,764
 269,570
 270,825
Disclosure of the estimated fair values of financial instruments often requires the use of estimates. The carrying amount and estimates of the fair value of the Company's debt obligations outlined above do not include any related debt issuance costs associated with the debt obligations. The Company uses the following methods and assumptions to estimate the fair value of the financial instruments in the above table:
Cash and cash equivalents: The carrying amount approximates fair value and quoted prices for identical assets can be found in active markets. Accordingly, the Company estimates the fair value of cash and cash equivalents using Level 1 inputs.

PRA Group, Inc.
Notes to Consolidated Financial Statements


Held-to-maturity investments: Fair value of the Company's investment in the certificates of a closed-end Polish investment fund is estimated using proprietary pricing models that the Company utilizes to make portfolio purchase decisions. Accordingly, the Company estimates the fair value of its held-to-maturity investments using Level 3 inputs as there is little observable market data available and management is required to use significant judgment in its estimates.
Other investments: This class of investments consists of private equity funds that invest primarily in loans and securities including single-family residential debt; corporate debt products; and financially-oriented, real-estate-rich and other operating companies in the Americas, Western Europe, and Japan. These investments are subject to certain restrictions regarding transfers and withdrawals. The investments can never be redeemed with the funds. Instead, the nature of the investments in this class is that distributions are received through the liquidation of the underlying assets of the fund. The fair value of the Company's interest is valued by the fund managers; accordingly, the Company estimates the fair value of these investments using Level 3 inputs. The investments are expected to be returned through distributions as a result of liquidations of the funds' underlying assets over 1 to 4 years.
Finance receivables, net: The Company computed the estimated fair value of these receivables using proprietary pricing models that the Company utilizes to make portfolio purchase decisions. Accordingly, the Company's fair value estimates use Level 3 inputs as there is limited observable market data available and management is required to use significant judgment in its estimates.
Interest-bearing deposits: The carrying amount approximates fair value due to the short-term nature of the deposits and the observable quoted prices for similar instruments in active markets. Accordingly, the Company uses Level 2 inputs for its fair value estimates.
Revolving lines of credit: The carrying amount approximates fair value due to the short-term nature of the interest rate periods and the observable quoted prices for similar instruments in active markets. Accordingly, the Company uses Level 2 inputs for its fair value estimates.
Term loans: The carrying amount approximates fair value due to the short-term nature of the interest rate periods and the observable quoted prices for similar instruments in active markets. Accordingly, the Company uses Level 2 inputs for its fair value estimates.
Convertible notes: The Notes are carried at historical cost, adjusted for the debt discount. The fair value estimates for the Notes incorporate quoted market prices which were obtained from secondary market broker quotes which were derived from a variety of inputs including client orders, information from their pricing vendors, modeling software, and actual trading prices when they occur. Accordingly, the Company uses Level 2 inputs for its fair value estimates. Furthermore, in the table above, carrying amount represents the portion of the Notes classified as debt, while estimated fair value pertains to the face amount of the Notes.
Financial Instruments Required To Be Carried At Fair Value
The carrying amounts in the following table are measured at fair value on a recurring basis in the accompanying consolidated balance sheets at September 30, 2017 and December 31, 2016 (amounts in thousands):
 Fair Value Measurements as of September 30, 2017
 Level 1 Level 2 Level 3 Total
Assets:       
Available-for-sale investments$3,769
 $—
 $—
 $3,769
Liabilities:       
Interest rate swap contracts (recorded in accrued expenses)—
 701
 —
 701
        
 Fair Value Measurements as of December 31, 2016
 Level 1 Level 2 Level 3 Total
Assets:       
Available-for-sale investments$2,138
 $—
 $—
 $2,138
Liabilities:       
Interest rate swap contracts (recorded in accrued expenses)—
 2,825
 —
 2,825
Available-for-sale investments: Fair value of the Company's investment in government bonds and mutual funds is estimated using quoted market prices. Accordingly, the Company uses Level 1 inputs.

PRA Group, Inc.
Notes to Consolidated Financial Statements


Interest rate swap contracts: The interest rate swap contracts are carried at fair value which is determined by using industry standard valuation models. These models project future cash flows and discount the future amounts to a present value using market-based observable inputs, including interest rate curves and other factors. Accordingly, the Company uses Level 2 inputs for its fair value estimates.
10. Recent Accounting Pronouncements:
In May 2014, FASB issued Accounting Standards Update ("ASU") 2014-09, "Revenue from Contracts with Customers" ("ASU 2014-09") that updates the principles for recognizing revenue. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance specifically excludes revenue received for servicing finance receivables. ASU 2014-09 also amends the required disclosures of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. ASU 2014-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, and can be adopted either retrospectively to each prior reporting period presented or as a cumulative-effect adjustment as of the date of adoption, with early application not permitted. The Company believes that the revenue generated by its subsidiary Claims Compensation Bureau, LLC ("CCB") is within the scope of this standard. Based on the Company's evaluation, the Company believes the new standard will not impact the accounting for revenue generated by CCB.
In January 2016, FASB issued ASU 2016-01, "Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities" ("ASU 2016-01"), which provides new guidance on the recognition, measurement, presentation, and disclosure of financial assets and liabilities. The standard is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted only for certain provisions. Under this standard, changes in fair value of the Company's investments currently classified as available-for-sale will be reported in earnings rather than as an adjustment to Other Comprehensive Income/(Loss). The Company is currently in the process of evaluating the impact of adoption of 2016-01 on its Other Investments.
In February 2016, FASB issued ASU 2016-02, "Leases (Topic 842) Section A - Leases: Amendments to the FASB Account Standards Codification" ("ASU 2016-02"). ASU 2016-02 requires that a lessee should recognize a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term on the balance sheet. It is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, using a modified retrospective approach and early adoption is permitted. The Company is currently in the process of evaluating the impact of adoption of ASU 2016-02 on its consolidated financial statements. The Company has approximately $43.8 million in operating lease obligations as disclosed in its contractual obligations table in Part I, Item 2 of this2023 Quarterly Report on Form 10-Q, and is in the process of evaluating those contracts as well as other existing arrangements to determine if they qualify for lease accounting under the there were no new standard. The Company does not plan to adopt the standard early.
In March 2016, FASB issued ASU 2016-06, "Derivatives and Hedging (Topic 815), Contingent Put and Call Options in Debt Instruments" ("ASU 2016-06"). Topic 815 requires that embedded derivatives be separated from the host contract and accounted for separately as derivatives if certain criteria are met, including the "clearly and closely related" criterion. ASU 2016-06 clarifies the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. An entity performing the assessment under the amendments is required to assess the embedded call (put) options solely in accordance with the four-step decision sequence. The amendments in ASU 2016-06 apply to all entities that are issuers of or investors in debt instruments (or hybrid financial instruments that are determined to have a debt host) with embedded call (put) options. For public entities, this update is effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. The Company adopted ASU 2016-06 in the first quarter of 2017 which had no material impact on its consolidated financial statements.
In March 2016, FASB issued ASU 2016-09, "Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting" ("ASU 2016-09"). The guidance eliminates additional paid in capital ("APIC") pools and requires companies to recognize all excess tax benefits and tax deficiencies in the income statement when the awards vest or are settled. It also addresses the presentation of excess tax benefits and employee taxes paid on the statement of cash flows. Further, the new guidance eliminates the requirement to estimate forfeitureslegal proceedings during the vesting period. Instead, companies can elect to account for actual forfeitures as they occur and record any previously unrecognized compensation expense for estimated forfeitures up to the period of adoption as a retrospective adjustment to beginning retained earnings. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years and early adoption is permitted. The Company prospectively adopted ASU 2016-09 in the first quarter of 2017, which increased its provision for income taxes by $0.9 million during the ninesix months ended SeptemberJune 30, 2017, as a result of the recognition of all excess tax benefits and tax deficiencies in its income statement. ASU 2016-09 requires that excess tax benefits be presented as an operating activity in the statement of cash2023.

PRA Group, Inc.13. Recently Issued Accounting Standards:
Notes to Consolidated Financial Statements


flows, so with its prospective adoption, prior periods haveRecently issued accounting standards not been restated. The Company also elected to use an estimated forfeiture rate, based on historical data, to record its share-based compensation expense, which is consistent with its previous accounting treatment with respect to forfeitures. None of the other provisions of ASU 2016-09 had a material impact on its consolidated financial statements.
In June 2016, FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326)" ("ASU 2016-13"). ASU 2016-13 requires the measurement of expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable forecasts. The main objective of ASU 2016-13 is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years and allows for early adoption as of the beginning of an interim or annual reporting period beginning after December 15, 2018. ASU 2016-13 supersedes ASC Topic 310-30, which the Company currently follows to account for revenue on its finance receivables. ASU 2016-13 could have a significant impact on how the Company measures and records net revenue on its finance receivables. The Company is currently in the process of evaluating the impact of adoption of ASU 2016-13 on its consolidated financial statements.
In August 2016, FASB issued ASU 2016-15, "Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments (Topic 230)" ("ASU 2016-15"). ASU 2016-15 reduces diversity in practice of how certain transactions are classified in the statement of cash flows. The new guidance clarifies the classification of cash activity related to debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate and bank-owned life insurance policies, distributions received from equity-method investments, and beneficial interests in securitization transactions. The guidance also describes a predominance principle in which cash flows with aspects of more than one class that cannot be separated should be classified based on the activity that is likely to be the predominant source or use of cash flow. ASU 2016-15 is effective for the Company for fiscal years beginning after December 15, 2018. Early adoption is permitted, including adoption in an interim period, but requires all elements of the amendments to be adopted at once rather than individually. The new standard must be adopted using a retrospective transition method. The Company is currently in the process of evaluating the impact of adoption of ASU 2016-15 on its consolidated financial statements.
In October 2016, FASB issued ASU 2016-16, "Income Taxes - Intra-Entity Transfers of Assets Other Than Inventory" ("ASU 2016-16"), which requires entities to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The standard is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted as of the beginning of a fiscal year. The new standard must be adopted using a modified retrospective transition method which is a cumulative-effect adjustment to retained earnings as of the beginning of the first effective reporting period. The Company has determined the adoption of this standard will not have a significant impact on its consolidated financial statements.
In January 2017, FASB issued ASU-2017-01, "Business Combinations - Clarifying the Definition of a Business (Topic 805)" ("ASU 2017-01"). ASU 2017-01 clarifies the definition of a business with the objective of adding guidance to assist companies with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The new guidance is expected to reduce the number of transactions that need to be further evaluated as businesses. The guidance applies to transactions that occur on or after an entity’s adoption date, the earliest of which is January 1, 2017. The Company has not completed a business combination in 2017.
In January 2017, FASB issued ASU No. 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment" ("ASU 2017-04"). ASU 2017-04 eliminates Step 2 of the goodwill impairment test. Instead, an entity should perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. ASU 2017-04 is effective for annual and interim periods beginning after December 15, 2019, and early adoption is permitted for interim or annual goodwill impairment tests performed after January 1, 2017. The Company is currently in the process of evaluating the impact of adoption of ASU 2017-04 on its consolidated financial statements.
In May 2017, FASB issued ASU No. 2017-09, “Compensation–Stock Compensation (Topic 718): Scope of Modification Accounting” (ASU 2017-09"). ASU 2017-09 clarifies when a change to the terms or conditions of a share-based payment award must be accounted for as a modification. The new guidance requires modification accounting if the fair value, vesting condition or the classification of the award is not the same immediately before and after a change to the terms and conditions of the award.

PRA Group, Inc.
Notes to Consolidated Financial Statements


The new guidance is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. This new guidance is not expected to have an impact on the Company's consolidated financial statements.
In August 2017, FASB issued ASU No. 2017-12, "Derivatives and Hedging - Targeted Improvements to Accounting for Hedging Activities" ("ASU 2017-12"). ASU 2017-12 modifies the presentation and disclosure of hedging results. Further, it provides partial relief on the timing of certain aspects of hedge documentation and eliminates the requirement to recognize hedge ineffectiveness separately in income. The amendments in ASU 2017-12 are effective for fiscal years beginning after December 15, 2018 and for interim periods therein. The Company is currently in the process of evaluating the impact of adoption of ASU 2017-12 on its consolidated financial statements.yet adopted:
The Company does not expect that any other recently issued accounting pronouncements will have a material effect on its consolidated financial statements.
11. Sale of Subsidiaries:
As part of the Company’s strategy to focus on its primary business, the purchase, collection and management of portfolios of nonperforming loans, the Company decided in the fourth quarter of 2016 to sell its government services businesses: PRA Government Services, LLC; MuniServices, LLC; and PRA Professional Services, LLC. On January 24, 2017, the Company completed the sale of its government services businesses for $91.5 million in cash plus additional consideration for certain balance sheet items. The impact of the transaction was reported in the first quarter of 2017. The gain on sale was approximately $46.8 million.
During the second quarter of 2017, the Company sold its vehicle location, skip tracing and collateral recovery business, PLS, for $4.5 million which resulted in a gain on sale of approximately $1.6 million.
The assets and liabilities of the businesses that were sold during 2017 consisted of the following (amounts in thousands):Consolidated Financial Statements.
27
 Nine Months Ended September 30, 2017
Other receivables, net$8,277
Property and equipment, net4,559
Goodwill29,683
Intangible assets, net1,711
Other assets772
Total assets$45,002
  
Accrued expenses$3,123
Total liabilities$3,123



Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements:
ThisAll references in this Quarterly Report on Form 10-Q (this "Quarterly Report") to "PRA Group," "we," "our," "us," "the Company" or similar terms are to PRA Group, Inc. and its subsidiaries.
Forward-Looking Statements:
This Quarterly Report contains forward-looking statements withinas defined by the meaningPrivate Securities Litigation Reform Act of the federal securities laws. These forward-looking statements involve risks, uncertainties and assumptions that could cause our results to differ materially from those expressed or implied by such forward-looking statements. All statements,1995. Statements other than statements of historical fact are forward-looking statements, including statements regarding overall cash collection trends, gross margin trends, operating cost trends, liquidity and capital needs and other statements of expectations, beliefs, future plans, strategies and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts. Thetrends. Our results could differ materially from those expressed or implied by such forward-looking statements, or our forward-looking statements could be wrong, as a result of risks, uncertainties and assumptions, referred to above may includeincluding the following:
a prolonged economic recovery or •a deterioration in the economic or inflationary environment in the Americas or Europe, including the interest rate environment;markets in which we operate;
changes in the credit or capital markets, which affect •our ability to borrow money or raise capital;
our abilityinability to replace our portfolios of nonperforming loans with additional portfolios;
our abilityportfolios sufficient to operate efficiently and profitably and/or purchase nonperforming loans at appropriate prices;
changes in, or interpretations of, federal, state, local, or foreign laws or the administrative practices of various bankruptcy courts, which may impact •our ability to collect on our nonperforming loans;
our abilityinability to collect sufficient amounts on our nonperforming loans;loans to fund our operations, including as a result of restrictions imposed by local, state, federal and international laws and regulations;
the possibility that we could incur significant allowance charges on our finance receivables;
•changes in accounting standards and their interpretations;
•the recognition of significant decreases in our estimate of future recoveries on nonperforming loans;
•the impact of a disease outbreak, such as the COVID-19 pandemic, on the markets in which we operate and our inability to successfully manage the challenges associated with a disease outbreak, including epidemics, pandemics or interpretationssimilar widespread public health concerns;
•the occurrence of bankruptcy or collection lawsgoodwill impairment charges;
•loss contingency accruals that could negatively affect are inadequate to cover actual losses;
•our business, including by causing an increase in certain types of bankruptcy filings involving liquidations, which may cause our collections to decrease;
our abilityinability to manage risks associated with our international operations;
•changes in local, state, federal or international laws or the interpretation of these laws, including tax, laws regarding earningsbankruptcy and collection laws;
•changes in the administrative practices of various bankruptcy courts;
•our subsidiaries located outside of the United States ("U.S.");
the possibility that we could incur goodwill or other intangible asset impairment charges;
adverse effects from the vote by the United Kingdom ("UK") to leave the European Union ("EU");
adverse outcomes in pending litigations or administrative proceedings;
our loss contingency accruals may not be adequate to cover actual losses;
the possibility that class action suits and other litigation could divert our management's attention and increase our expenses;
the possibility that we could incur business or technology disruptions or cyber incidents;
our ability to collect and enforce our finance receivables may be limited under federal, state, local and foreign laws;
our abilityinability to comply with existing and new regulations of the collection industry, the failure of which could result in penalties, fines, litigation, damage to our reputation, or the suspension or termination of or required modification to our ability to conduct our business;industry;
•investigations, reviews, or enforcement actions by governmental authorities, including the Consumer Financial Protection Bureau ("CFPB"), which could result;
•our inability to comply with data privacy regulations such as the General Data Protection Regulation ("GDPR");
•adverse outcomes in changespending litigation or administrative proceedings;
•our inability to our business practices; negatively impact our portfolio purchasing volume; make collection of account balances more difficult or expose us to the risk of fines, penalties, restitution payments, and litigation;
the possibility that compliance with foreign and U.S. laws and regulations that apply to our international operations could increase our cost of doing business in international jurisdictions;
our ability to raise the funds necessary to repurchase the convertible senior notes or to settle conversions in cash;
our ability to maintain,retain, expand, renegotiate or replace our credit facilities;facilities and our inability to comply with the covenants under our financing arrangements;
•our inability to manage effectively our capital and liquidity needs, including as a result of changes in credit or capital markets;
•changes in interest or exchange rates, which could reducerates;
•default by or failure of one or more of our net income,counterparty financial institutions;
•disruptions of business operations caused by cybersecurity incidents or the underperformance or failure of information technology infrastructure, networks or communication systems; and
•the possibility that future hedging strategies may not be successful, which could adversely affect"Risk Factors" in Item 1A of our results of operationsAnnual Report on Form 10-K for the year ended December 31, 2022 ("2022 Form 10-K") and financial condition, as could our failure to comply with hedge accounting principles and interpretations; and
the risk factors discussed in ourother filings with the Securities and Exchange Commission (the "SEC").Commission.
You should assume that the information appearing in this Quarterly Report is accurate only as of the date it was issued. Our business, financial condition, results of operations and prospects may have changed since that date.
You should carefully consider the factors listed above and review the following "Management's Discussion and Analysis of Financial Condition and Results of Operations," as well as the "Risk Factors" section and "Business" section of our Annual Report on Form 10-K for the year ended December 31, 2016, filed with the SEC on March 1, 2017 ("2016 Form 10-K").
Our forward-looking statements could be wrong in light of these and other risks, uncertainties and assumptions. The future events, developments or results described in, or implied by, this Quarterly Report could turn out to be materially different. Except as required by law, we assume no obligation to publicly update or revise our forward-looking statements after the date of this Quarterly Report and you should not expect us to do so.

28


Investors should also be aware that while we do, from time to time, communicate with securities analysts and others, we do not, by policy, selectively disclose to them any material nonpublic information or other confidential commercial information. Accordingly, investors should not assume that we agree with any statement or report issued by any analyst regardless of the content of the statement or report. We do not, by policy, confirm forecasts or projections issued by others. Thus, to the extent that reports issued by securities analysts contain any projections, forecasts or opinions, such reports are not our responsibility.
Frequently Used Terms
We may use the following terminology throughout this Quarterly Report:
"Allowance charges" refers to a reduction in income recognized on finance receivables on pools of finance receivables due to a decrease in cash collection estimates or a delay in the expected timing of the cash collections.
"Amortization rate" refers to cash collections applied to principal on finance receivables as a percentage of total cash collections.
•"Buybacks" refers to purchase price refunded by the seller due to the return of ineligible accounts.
•"Cash collections" refers to collections on our owned finance receivablesnonperforming loan portfolios.
•"Cash receipts" refers to cash collections on our nonperforming loan portfolios, fees and revenue recognized from our class action claims recovery service.
•"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 purchase.acquisition. 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 owned finance receivablesnonperforming loan portfolios.
•"Fee income"Finance receivables" or "receivables" refers to revenues generated fromthe negative allowance for expected recoveries recorded on our fee-for-service businesses.balance sheet as an asset.
"Income recognized on finance receivables" refers to income derived from our owned finance receivables portfolios.
"Income recognized on finance receivables, net" refers to income derived from our owned finance receivables portfolios and is shown net of allowance charges/reversals.
•"Insolvency" accounts or portfolios refer to accounts or portfolios of receivablesnonperforming loans that are in an insolvent status when we purchase them and, as such, are purchased as a pool of insolvent accounts. These accounts include Individual Voluntary Arrangements ("IVAs"),IVAs, Trust Deeds in the UK, Consumer Proposals in Canada and bankruptcy accounts in the U.S., Canada, Germany and the UK.
•"Net finance receivable balance" is recorded on our balance sheet andNegative 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 added as a result of a purchase, but also includes portfolios 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 less principal amortizationof nonperforming loan portfolios and net allowance charges/reversals.estimated remaining collections.
"Nonperforming loans" refers to the loans that we purchase, which consist generally of defaulted, unpaid obligations of individuals that have been charged-off by the credit grantor.
"Principal amortization" refers to cash collections applied to principal on finance receivables.
•"Purchase price" refers to the cash paid to a seller to acquire nonperforming loans, plus certain capitalized costs, less buybacks.loans.
•"Purchase price multiple" refers to the total estimated collections (as defined below) on owned finance receivablesour 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 including cash sales, plus estimated remaining collections on our finance receivablesnonperforming loan portfolios.
All references in this Quarterly Report to "PRA Group," "our," "we," "us," the "Company" or similar terms are to PRA Group, Inc. and its subsidiaries.
29

Overview
We are a global financial and business services company with operations in the Americas, Europe and Europe.Australia. Our primary business is the purchase, collection and management of portfolios of nonperforming loans. As discussed in Note 11, we sold our government services businesses in January 2017 and PLS in June 2017.
We are headquartered in Norfolk, Virginia, and as of SeptemberJune 30, 2017 employ 4,555 full time2023, employed 3,145 full-time equivalents. Our shares of common stock are traded on the NASDAQ Global Select Market under the symbol "PRAA."

Executive Overview

Earnings Summary
DuringFor the three months ended SeptemberJune 30, 2017, net income attributable to PRA Group, Inc. was $15.6 million, or $0.342023, we had:
•Total portfolio purchases of $327.8 million.
•Total cash collections of $419.3 million.
•Estimated remaining collections of $5.9 billion.
•Cash efficiency ratio of 61.2%.
•Diluted earnings per diluted share compared with $34.3 million, or $0.74 per diluted share, inof $(0.10).
For the threesix months ended SeptemberJune 30, 2016. 2023, we had:
•Total revenues decreased 9.5% to $201.0 million inportfolio purchases of $558.0 million.
•Total cash collections of $830.6 million.
•Estimated remaining collections of $5.9 billion.
•Cash efficiency ratio of 57.8%.
•Diluted earnings per share of $(1.60).
We believe our cash forecast curves are appropriate given the three months ended September 30, 2017, compared to the three months ended September 30, 2016. Revenues in the three months ended September 30, 2017 consisted of $197.2 million in income recognized on finance receivables, net; $2.7 million in fee income; and $1.1 million in other revenue. Revenues in the three months ended September 30, 2016 consisted of $202.6 million in income recognized on finance receivables, net; $17.6 million in fee income; and $1.7 million in other revenue. Income recognized on finance receivables, net, in the three months ended September 30, 2017 decreased $5.4 million, or 2.7%, over the three months ended September 30, 2016, primarily due to a reduction in revenue generated by our Americas Insolvency portfolio which has declined due to lower volumes of purchasing during fiscal years 2014 to 2016. Cash collections were $381.8 million in the three months ended September 30, 2017, up 2.7%, or $10.1 million,information we have as compared to the three months ended September 30, 2016.
A summary of the sourcesdate of our revenue duringthis Quarterly Report. However, we continue to operate in an economic environment that includes elevated levels of inflation, rising interest rates, foreign exchange rate fluctuations, and concerns of a global recession. Given the three months ended September 30, 2017 and 2016 is presented below (amounts in thousands):
 For the Three Months Ended September 30,
 2017 2016
Cash collections$381,834
 $371,700
Principal amortization(181,174) (155,915)
Net allowance charges(3,412) (13,146)
Income recognized on finance receivables, net197,248
 202,639
Fee income2,671
 17,597
Other revenue1,091
 1,748
Total revenues$201,010
 $221,984
Operating expenses were $146.8 million for the three months ended September 30, 2017, a decrease of $7.7 million or 5.0%, as compared to the three months ended September 30, 2016. This decrease was primarily due to a decrease in legal collection expenses, mainly due to a reduction in the number of accounts brought into the legal collection process in the Americas, in addition to a decrease in agency fees, due primarily to the sale of PLS in June 2017, as well as a decrease in third-party collection fees incurred by our foreign operations.
During the three months ended September 30, 2017 and 2016, we acquired finance receivables portfolios at a cost of $210.9 million and $161.3 million, respectively.  In any period, we acquire nonperforming loanscontinuing weak economic conditions, there may be some near-term pressure on cash collections. Note that factors that can vary dramatically incause near-term collections pressure are also typically the same factors that historically have led to more portfolio supply, as consumers struggle to manage and pay down their age, typedebt. We cannot predict the full extent to which these items will impact our business, results of operations and ultimate collectability. We may pay significantly different purchase prices relative to face value for purchased receivables within any period as a result of this quality fluctuation. In addition, market forces can increase or decrease pricing, irrespective of other quality fluctuations. As a result, the average purchase price paid relative to face value for any given period can fluctuate dramatically. However, regardless of the average purchase price, we intend to target a similar net income margin in pricing our portfolio acquisitions during any given period. Therefore, the price paid relative to face value is not necessarily indicative of profitability.

financial condition.


30

Results of Operations
The results of operations include the financial results of the Company and all of its subsidiaries.our subsidiaries. Certain prior year amounts have been reclassified for consistency with the current year presentation. The following tabletable sets forth consolidated income statementour Consolidated Income Statement amounts as a percentage of totalTotal revenues for the periods indicated:indicated (dollars in thousands):
For the Three Months Ended June 30,For the Six Months Ended June 30,
2023202220232022
Revenues:
Portfolio income$184,290 88.1 %$194,009 75.1 %$372,532 102.1 %$401,541 80.5 %
Changes in expected recoveries21,136 10.1 56,567 21.9 (15,776)(4.3)86,481 17.3 
Total portfolio revenue205,426 98.2 250,576 97.0 356,756 97.8 488,022 97.8 
Other revenue3,810 1.8 7,686 3.0 7,950 2.2 10,845 2.2 
Total revenues209,236 100.0 258,262 100.0 364,706 100.0 498,867 100.0 
Operating expenses:
Compensation and employee services65,788 31.4 74,137 28.7 148,191 40.6 145,233 29.1 
Legal collection fees9,551 4.6 9,554 3.7 18,389 5.0 20,427 4.1 
Legal collection costs21,522 10.3 17,746 6.9 45,467 12.5 34,303 6.9 
Agency fees17,677 8.4 14,826 5.8 35,055 9.6 32,214 6.5 
Outside fees and services18,262 8.7 27,493 10.6 43,206 11.9 46,871 9.4 
Communication10,117 4.8 9,528 3.7 20,644 5.7 22,111 4.4 
Rent and occupancy4,319 2.1 4,633 1.8 8,767 2.4 9,620 1.9 
Depreciation and amortization3,482 1.7 3,865 1.5 7,071 1.9 7,643 1.5 
Other operating expenses12,957 6.2 12,743 4.9 25,999 7.1 24,741 5.0 
Total operating expenses163,675 78.2 174,525 67.6 352,789 96.7 343,163 68.8 
   Income from operations45,561 21.8 83,737 32.4 11,917 3.3 155,704 31.2 
Other income and (expense):
Interest expense, net(43,022)(20.6)(31,562)(12.2)(81,305)(22.3)(63,310)(12.8)
Foreign exchange gain, net429 0.2 1,319 0.5 420 0.1 787 0.2 
Other(230)(0.1)(181)(0.1)(880)(0.3)(671)(0.1)
Income/(loss) before income taxes2,738 1.3 53,313 20.6 (69,848)(19.2)92,510 18.5 
Income tax expense/(benefit)1,578 0.8 14,177 5.5 (17,105)(4.7)18,756 3.7 
Net income/(loss)1,160 0.5 39,136 15.1 (52,743)(14.5)73,754 14.8 
Adjustment for net income/(loss) attributable to noncontrolling interests4,964 2.4 2,652 1.0 9,690 2.7 (2,702)(0.5)
Net income/(loss) attributable to PRA Group, Inc.$(3,804)(1.9)%$36,484 14.1 %$(62,433)(17.2)%$76,456 15.3 %
31
 For the Three Months Ended September 30, For the Nine Months Ended September 30,
 2017 2016 2017 2016
Revenues:       
Income recognized on finance receivables, net98.1 % 91.3 % 95.8 % 90.8 %
Fee income1.3 % 7.9 % 3.1 % 8.3 %
Other revenue0.6 % 0.8 % 1.1 % 0.9 %
Total revenues100.0 % 100.0 % 100.0 % 100.0 %
Operating expenses:       
Compensation and employee services34.1 % 29.7 % 33.5 % 29.2 %
Legal collection expenses13.7 % 15.1 % 14.9 % 14.4 %
Agency fees3.8 % 5.4 % 4.5 % 5.1 %
Outside fees and services7.9 % 6.6 % 7.8 % 6.9 %
Communication4.3 % 3.5 % 4.1 % 3.9 %
Rent and occupancy1.8 % 1.7 % 1.8 % 1.7 %
Depreciation and amortization2.4 % 2.8 % 2.5 % 2.7 %
Other operating expenses5.0 % 4.7 % 5.3 % 4.8 %
Total operating expenses73.0 % 69.6 % 74.4 % 68.7 %
Income from operations27.0 % 30.4 % 25.6 % 31.3 %
Other income and (expense):       
Gain on sale of subsidiaries0.2 %
— % 8.0 % — %
Interest expense, net(12.9)% (8.7)% (11.5)% (8.9)%
Foreign exchange (loss)/gain(0.6)% 2.3 % (0.2)% 0.8 %
Income before income taxes13.7 % 24.0 % 21.9 % 23.2 %
Provision for income taxes5.3 % 7.5 % 8.7 % 7.4 %
Net income8.4 % 16.5 % 13.2 % 15.7 %
Adjustment for net income attributable to noncontrolling interest0.7 % 1.0 % 0.8 % 0.5 %
Net income attributable to PRA Group, Inc.7.7 % 15.5 % 12.4 % 15.2 %

Three Months Ended SeptemberJune 30, 20172023 Compared To Three Months Ended SeptemberJune 30, 20162022
RevenuesCash Collections
Total revenuesCash collections for the periods indicated were $201.0as follows (amounts in thousands):
For the Three Months Ended June 30,
20232022 $ Change % Change
Americas and Australia Core$220,886 $244,377 $(23,491)(9.6)%
Americas Insolvency26,384 34,278 (7,894)(23.0)
Europe Core149,324 142,470 6,854 4.8 
Europe Insolvency22,725 22,935 (210)(0.9)
Total cash collections$419,319 $444,060 $(24,741)(5.6)%
Cash collections adjusted (1)
$419,319 $441,697 $(22,378)(5.1)%
(1) Cash collections adjusted refers to 2022 cash collections remeasured using 2023 exchange rates.
Cash collections were $419.3 million for the three months ended SeptemberJune 30, 2017,2023, a decrease of $21.0$24.7 million, or 9.5%5.6%, compared to total revenues of $222.0$444.0 million for the three months ended SeptemberJune 30, 2016.2022. The decrease was primarily due to lower cash collections of $33.1 million, or 23.9%, in U.S. call center and other collections, and lower cash collections of $7.9 million, or 23.0%, in Americas Insolvency collections, both reflecting lower recent purchasing levels in recent years. U.S. legal cash collections decreased $8.9 million, or 12.0%, reflecting the impact from the lower volume of accounts placed in the legal channel due to lower purchasing levels in recent years. These decreases were partially offset by an increase in Europe cash collections of $6.6 million, or 4.0%, and an increase of $18.5 million, or 58.6%, in cash collections in the Other Americas Core pools, both driven by higher recent purchases.
Income Recognized on Finance Receivables, netRevenues
Income recognized on finance receivables, netRevenue generation for the periods indicated was $197.2as follows (amounts in thousands):
For the Three Months Ended June 30,
20232022 $ Change% Change
Portfolio income$184,290 $194,009 $(9,719)(5.0)%
Changes in expected recoveries21,136 56,567 (35,431)(62.6)
Total portfolio revenue205,426 250,576 (45,150)(18.0)
Other revenue3,810 7,686 (3,876)(50.4)
Total revenues$209,236 $258,262 $(49,026)(19.0)%
Total Portfolio Revenue
Total portfolio revenue was $205.4 million for the three months ended SeptemberJune 30, 2017,2023, a decrease of $5.4$45.2 million, or 2.7%18.0%, compared to income recognized on finance receivables, net, of $202.6$250.6 million for the three months ended SeptemberJune 30, 2016.2022. The decrease was due to a varietylargely driven by lower purchasing, lower levels of factors. Income generated by our Americas Insolvency portfolios declined due primarily to lower volumes of purchasing during fiscal years 2014 to 2016. Income generated by our European portfolios declined due primarilycash overperformance and an increase to the impactERC of certain older pools during the current competitive pricing environment which has resulted in lower yields on new portfolios. Also, elevated allowance charges incurredthree months ended June 30, 2022, that did not recur during 2016 reduced the income-earning principal balances of our portfolios, particularly the Americas Core portfolios. Thisthree months ended June 30, 2023.
Other Revenue
Other revenue was offset by overperformance on select Americas Core and European Core portfolios which resulted in yield increases on certain pools, as well as a decline in net allowance charges, which were $3.4$3.8 million for the three months ended SeptemberJune 30, 2017,2023, a decrease of $3.9 million compared to $13.1$7.7 million for the three months ended SeptemberJune 30, 2016.


Cash collections were $381.8 million in the three months ended September 30, 2017, up $10.1 million, or 2.7%, as compared to the three months ended September 30, 2016.2022. The increase in cash collections was mainly caused by increases in our European Core and Americas Core portfolio collections, which increased $6.7 million and $2.2 million, respectively. Cash collections on fully amortized pools were $14.1 million in the three months ended September 30, 2017, up $6.4 million or 83.1%, compared to $7.7 million in the three months ended September 30, 2016. Cash collections on pools on cost recovery were $8.1 million in the three months ended September 30, 2017, up $1.4 million or 20.9%, compared to $6.7 million in the three months ended September 30, 2016.
Income recognized on finance receivables, net, is shown net of changes in valuation allowances which are recorded for significant decreases in expected cash flows or a change in timing of cash flows which would otherwise require a reduction in the stated yield on a pool of accounts. For the three months ended September 30, 2017, we recorded net allowance charges of $3.4 million, consisting of $2.4 million on our Americas portfolios and $1.0 million on our European portfolios. For the three months ended September 30, 2016, we recorded net allowance charges of $13.1 million, consisting of $12.4 million on our Americas portfolios and $0.7 million on our European portfolios.
During the three months ended September 30, 2017, we reclassified $68.7 million from nonaccretable difference to accretable yield primarily due to increased cash collection forecasts relating mainly to certain Americas Core and European Core pools. During the three months ended September 30, 2016, we reclassified $5.9 million from nonaccretable difference to accretable yield primarily due to increased cash collection forecasts relating mainly to certain European Core pools, partially offset by decreases in cash collection forecasts relating mainly to certain Americas Core pools.
Fee Income
Fee income was $2.7 million in the three months ended September 30, 2017, a decrease of $14.9 million or 84.7%, compared to $17.6 million in the three months ended September 30, 2016. This was primarily due to a decreasethe timing of settlements in fee income resulting from the sale of our government services businesses in January 2017 and the sale of PLS in June 2017.
Other Revenue
Other revenue decreased to $1.1 million in the three months ended September 30, 2017 from $1.7 million in the three months ended September 30, 2016, primarily due to a decrease in revenue generated by our investments.claims processing company, Claims Compensation Bureau, LLC ("CCB").
Operating Expenses
Total operating expenses were $146.8$163.7 million for the three months ended SeptemberJune 30, 2017,2023, a decrease of $7.7$10.8 million, or 5.0%6.2%, compared to operating expenses of $154.5$174.5 million for the three months ended SeptemberJune 30, 2016.2022.
32

Compensation and Employee Services
Compensation and employee services expenses were $68.5$65.8 million for the three months ended SeptemberJune 30, 2017, an increase2023, a decrease of $2.6$8.3 million, or 3.9%11.2%, compared to compensation and employee services expenses of $65.9$74.1 million for the three months ended SeptemberJune 30, 2016. Compensation expense increased primarily as a result of larger average staff sizes, partially offset by a2022. The decrease resulting from the sale of our government services businesses in January 2017mainly reflects lower compensation accruals and the sale of PLS in June 2017. In the U.S., we have hired approximately 700 net new collectors since September 30, 2016. Total full-time equivalents increased to 4,555 as of September 30, 2017, compared to 3,859 as of September 30, 2016.lower healthcare expense.
Legal Collection ExpensesCosts
Legal collection expenses representcosts consist primarily of costs paid to courts where a lawsuit is filed contingent fees incurred for the cash collections generated for us by independent third-party attorneys, and the costpurpose of documents paidattempting to sellers of portfolios. Legal collection expensescollect on an account. These costs were $27.6$21.5 million for the three months ended SeptemberJune 30, 2017, a decrease2023, an increase of $5.8$3.8 million, or 17.4%21.5%, compared to legal collection expenses of $33.4$17.7 million for the three months ended SeptemberJune 30, 2016.2022. The increase reflects the higher volume of accounts in the legal channel in the U.S.
Agency Fees
Agency fees were $17.7 million for the three months ended June 30, 2023, an increase of $2.9 million, or 19.6%, compared to $14.8 million for the three months ended June 30, 2022. The increase is primarily due to the increase in cash collections in South America.
Outside Fees and Services
Outside fees and services expenses were $18.3 million for the three months ended June 30, 2023, a decrease of $9.2 million, or 33.5%, compared to $27.5 million for the three months ended June 30, 2022. The decrease was primarily due to a decrease in costs paid to courts where a lawsuit is filed, mainly due to a decrease inhigher corporate legal fees during the number of accounts brought into the legal collection process in the Americas. Our costs paid to courts were $17.3three months ended June 30, 2022.
Interest Expense, Net
Interest expense, net was $43.0 million for the three months ended SeptemberJune 30, 2017, a decrease2023, an increase of $6.1$11.4 million, or 26.1%36.3%, compared to $23.4$31.6 million for the three months ended SeptemberJune 30, 2016. Additionally,2022, primarily reflecting a higher average debt balance and increased interest rates. Interest income increased $4.1 million primarily as a result of the cash we received and invested from the issuance of our costs paidSenior Notes due 2028 ("2028 Notes"). We used substantially all of the net proceeds from our 2028 Notes to sellersretire our Convertible Senior Notes due 2023 (the "2023 Notes"), which matured on June 1, 2023.
Interest expense, net consisted of nonperforming loans for documents were $0.3the following (amounts in thousands):
For the Three Months Ended June 30,
20232022 $ Change% Change
Interest on debt obligations and unused line fees$25,154 $16,720 $8,434 50.4 %
Interest on senior notes18,165 9,906 8,259 83.4 
Coupon interest on convertible notes2,013 3,019 (1,006)(33.3)
Amortization of loan fees and other loan costs2,384 2,471 (87)(3.5)
Interest income(4,694)(554)(4,140)747.3 
Interest expense, net$43,022 $31,562 $11,460 36.3 %
Income Tax Expense/(Benefit)
Income tax expense was $1.6 million for the three months ended SeptemberJune 30 2017,2023, a decrease of $0.4$12.6 million, or 57.1%88.9%, compared to $0.7$14.2 million for the three months ended SeptemberJune 30, 2016.2022. During the three months ended June 30, 2023, our effective tax rate was 57.6%, compared to 26.6% for the three months ended June 30, 2022. The decrease in income tax expense was primarily due to lower income before taxes during the three months ended June 30, 2023, which decreased by $50.6 million, or 94.9%. The increase in our effective tax rate was primarily due to the timing of discrete items.
33

Six Months Ended June 30, 2023 Compared To Six Months Ended June 30, 2022
Cash Collections
Cash collections for the periods indicated were as follows (amounts in thousands):
For the Six Months Ended June 30,
20232022$ Change% Change
Americas and Australia Core$448,846 $514,661 $(65,815)(12.8)%
Americas Insolvency52,135 69,487 (17,352)(25.0)
Europe Core283,329 293,632 (10,303)(3.5)
Europe Insolvency46,293 47,260 (967)(2.0)
Total cash collections$830,603 $925,040 $(94,437)(10.2)
Cash collections adjusted (1)
$830,603 $906,980 $(76,377)(8.4)%
(1) Cash collections adjusted refers to 2022 cash collections remeasured using 2023 exchange rates.
Cash collections were $830.6 million for the six months ended June 30, 2023, a decrease of $94.4 million, or 10.2%, compared to $925.0 million for the six months ended June 30, 2022. The decrease was primarilylargely due to a decline of $81.8 million, or 27.3%, in cash collections in U.S. call center and other collections, and lower cash collections of $17.4 million, or 25.0%, in Americas Insolvency collections, both reflecting lower purchasing levels. U.S. legal cash collections decreased $22.4 million, or 14.4%, reflecting the resultimpact from the lower volume of sellers providing more account documentsaccounts in the legal channel due to us when we purchase portfolios, mainly as a resultlower purchasing levels in recent periods. Europe collections decreased $11.3 million, or 3.3%, due to the strengthening of regulatory requirements. This wasthe U.S. dollar, partially offset by higher levels of portfolio purchases in recent years. These decreases were partially offset by an increase in legal collection expenses paidcash collections in the Other Americas Core pools of $38.4 million, or 63.7%, due mainly to third-party attorneys. Our costs paid to third-party attorneys were $10.1recent purchases.
Revenues
Revenue generation for the periods indicated was as follows (amounts in thousands):
For the Six Months Ended June 30,
20232022$ Change% Change
Portfolio income$372,532 $401,541 $(29,009)(7.2)%
Changes in expected recoveries(15,776)86,481 (102,257)(118.2)
Total portfolio revenue356,756 488,022 (131,266)(26.9)
Other revenue7,950 10,845 (2,895)(26.7)
Total revenues$364,706 $498,867 $(134,161)(26.9)%
Total Portfolio Revenue
Total portfolio revenue was $356.8 million for the threesix months ended SeptemberJune 30, 2017, an increase2023, a decrease of $0.8$131.2 million, or 8.6%26.9%, compared to $9.3$488.0 million for the threesix months ended SeptemberJune 30, 2016.2022. The decrease was largely driven by lower purchasing, lower levels of cash overperformance and an increase to the ERC of certain older pools during the six months ended June 30, 2022, that did not recur during the six months ended June 30, 2023. Additionally, and primarily impacting the first quarter of 2023, we experienced a softer tax season than we had anticipated, with U.S. collections lower than our expectations, which then prompted a reduction in forward-looking ERC. This resulted in a negative $31.1 million net present value adjustment for our U.S. Core portfolio, with nearly half of this adjustment related to the 2021 U.S. Core vintage. This vintage includes the cohort of customers whose accounts were charged-off in peak stimulus periods. We believe this effect, along with inflation and other macroeconomic factors, to be the drivers of the underperformance. In total, Europe overperformed our expectations by 7.0% during the six months ended June 30, 2023. This is a lower margin than we experienced in prior quarters, and given the uncertain economic conditions globally, we made fewer adjustments to the forward-looking ERC than in the prior year.

Other revenue

Agency Fees
Agency fees primarily represent third-party collection fees and costs paid to repossession agents to repossess vehicles. Agency fees were $7.6Other revenue was $8.0 million for the threesix months ended SeptemberJune 30, 2017,2023, a decrease of $2.8 million compared to $12.0$10.8 million for the threesix months ended SeptemberJune 30, 2016.2022. The decrease was primarily due to the impacttiming of settlements in CCB.
34

Operating Expenses
Operating expenses were $352.8 million for the salesix months ended June 30, 2023, an increase of PLS in$9.6 million, or 2.8%, compared to $343.2 million for the six months ended June 2017 in addition30, 2022.
Compensation and Employee Services
Compensation and employee services expenses were $148.2 million for the six months ended June 30, 2023, an increase of $3.0 million, or 2.1%, compared to $145.2 million for the six months ended June 30, 2022. The increase mainly reflects higher severance expenses of $7.5 million, partially offset by lower compensation accruals and a decrease in third-partytemporary labor and healthcare expenses.
Legal Collection Fees
Legal collection fees incurredwere $18.4 million for the six months ended June 30, 2023, a decrease of $2.0 million, or 9.8%, compared to $20.4 million for the six months ended June 30, 2022. The impact from lower external legal cash collections in the U.S. was partially offset by our foreign operations.higher costs in South America driven by higher cash collections.
Legal Collection Costs
Legal collection costs were $45.5 million for the six months ended June 30, 2023, an increase of $11.2 million, or 32.7%, compared to $34.3 million for the six months ended June 30, 2022. The increase reflects the higher volume of accounts in the legal channel.
Agency Fees
Agency fees were $35.1 million for the six months ended June 30, 2023, an increase of $2.9 million, or 9.0%, compared to $32.2 million for the six months ended June 30, 2022. The increase is primarily due to the increase in cash collections in South America.
Outside Fees and Services
Outside fees and services expenses were $15.6$43.2 million for the threesix months ended SeptemberJune 30, 2017,2023, a decrease of $3.7 million, or 7.9%, compared to $46.9 million for the six months ended June 30, 2022. The decrease reflects lower corporate legal costs and lower consulting fees.
Interest Expense, Net
Interest expense, net was $81.3 million for the six months ended June 30, 2023, an increase of $0.9$18.0 million, or 6.1%28.4%, compared to outside fees and services expenses of $14.7$63.3 million for the threesix months ended SeptemberJune 30, 2016. This increase was2022, primarily due toreflecting a $1.7higher average debt balance and increased interest rates. Interest income increased $7.6 million increase in consulting fees, partially offset by a $0.8 million decrease in corporate legal and other professional fees.
Communication
Communication expenses were $8.7 million for the three months ended September 30, 2017, an increase of $0.9 million or 11.5%, compared to communication expenses of $7.8 million for the three months ended September 30, 2016. This increase was primarily due to a $1.0 million increase in postage expenses. This was partially offset by a $0.1 million decrease in telephone expense.
Rent and Occupancy
Rent and occupancy expenses were $3.7 million for the three months ended September 30, 2017, a decrease of $0.2 million or 5.1%, compared to rent and occupancy expense of $3.9 million for the three months ended September 30, 2016. The decrease was primarily due to the impact of the sale of our government services businesses in January 2017cash we received and the sale of PLS in June 2017.
Depreciation and Amortization
Depreciation and amortization expenses were $4.8 million for the three months ended September 30, 2017, a decrease of $1.4 million, or 22.6%, compared to depreciation and amortization expenses of $6.2 million for the three months ended September 30, 2016. The decrease was primarily due to the impact of the sale of our government services businesses in January 2017 and the sale of PLS in June 2017.
Other Operating Expenses
Other operating expenses were $10.1 million for the three months ended September 30, 2017, a decrease of $0.4 million, or 3.8%, compared to other operating expenses of $10.5 million for the three months ended September 30, 2016.
Gain on Sale of Subsidiaries
Gain on sale of subsidiaries was $0.3 million for the three months ended September 30, 2017 compared to $0 for the three months ended September 30, 2016. The amount relates to a purchase price true-up on the sale of PLS.
Interest Expense, Net
Interest expense, net was $25.9 million during the three months ended September 30, 2017, an increase of $6.6 million or 34.2%, compared to $19.3 million for the three months ended September 30, 2016. The increase was primarily due to the additional interest incurred as a result ofinvested from the issuance of our new convertible senior notes,2028 Notes, substantially all of the net proceeds of which we issued and sold on May 26, 2017, as well as increases in interest rates and unused line fees. This was partially offset by a decrease in interest expense caused byused to retire our interest rate swaps and a decrease in the average borrowings outstanding on our revolving credit facilities and term loans.2023 Notes.







Interest expense, net consisted of the following for the three months ended September 30, 2017 and 2016 (amounts in thousands):
For the Six Months Ended June 30,
20232022$ Change% Change
Interest on debt obligations and unused line fees$46,978 $33,515 $13,463 40.2 %
Interest on senior notes33,238 19,813 13,425 67.8 
Coupon interest on convertible notes5,032 6,038 (1,006)(16.7)
Amortization of loan fees and other loan costs4,825 5,098 (273)(5.4)
Interest income(8,768)(1,154)(7,614)659.8 
Interest expense, net$81,305 $63,310 $17,995 28.4 %
Income Tax Expense/(Benefit)
 Three Months Ended September 30,
 2017 2016 Change
Stated interest on debt obligations and unused line fees$17,945
 $16,600
 $1,345
Coupon interest on convertible debt5,175
 2,156
 3,019
Amortization of convertible debt discount2,796
 1,127
 1,669
Amortization of loan fees and other loan costs2,505
 1,647
 858
Interest rate swap agreements(1,025) (669) (356)
Interest income(1,497) (1,551) 54
Interest expense, net$25,899
 $19,310
 $6,589
Net Foreign Currency Transaction (Losses)/Gains
Net foreign currency transaction losses were $1.1Income tax benefit was $17.1 million for the threesix months ended SeptemberJune 30, 20172023, a decrease of $35.9 million, or 191.0%, compared to net foreign currency transaction gainsincome tax expense of $5.0$18.8 million for the threesix months ended SeptemberJune 30, 2016. In any given period, our foreign entities conduct operations in currencies different from their functional currency which generate foreign currency transaction gains and losses.
Provision for Income Taxes
Provision for income taxes was $10.7 million for2022. During the threesix months ended SeptemberJune 30, 2017, a decrease of $6.0 million, or 35.9%, compared to provision for income taxes of $16.7 million for the three months ended September 30, 2016. The decrease was primarily due to a $25.6 million decrease in income before income taxes for the three months ended September 30, 2017 as compared to the three months ended September 30, 2016, partially offset by an increase in our effective tax rate. During the three months ended September 30, 2017,2023, our effective tax rate was 38.7%24.5%, compared to 32.2% for full-year 2016. The increase was due primarily to changes in the mix of projected taxable income between tax jurisdictions and an increase in the estimated blended rate for U.S. state taxes.  The blended rate for U.S. state taxes increase was due to changes in the mix of earnings, dispositions of subsidiaries, and other factors.
Nine Months Ended September 30, 2017 Compared To Nine Months Ended September 30, 2016
Revenues
Total revenues were $607.9 million20.3% for the ninesix months ended SeptemberJune 30, 2017, a decrease of $67.4 million, or 10.0%, compared to total revenues of $675.3 million for the nine months ended September 30, 2016.
Income Recognized on Finance Receivables, net
Income recognized on finance receivables, net was $582.6 million for the nine months ended September 30, 2017, a decrease of $30.6 million, or 5.0%, compared to income recognized on finance receivables, net, of $613.2 million for the nine months ended September 30, 2016. The decrease was due to a variety of factors. Income generated by our Americas Insolvency portfolios declined due primarily to lower volumes of purchasing during fiscal years 2014 to 2016. Income generated by our European portfolios declined due primarily to the impact of the current competitive pricing environment which has resulted in lower yields on new portfolios. Also, elevated allowance charges incurred during 2016 reduced the income-earning principal balances of our portfolios, particularly the Americas Core portfolios. This was offset by overperformance on select Americas Core and European Core portfolios which resulted in yield increases on certain pools, as well as a decline in net allowance charges, which were $9.4 million for the nine months ended September 30, 2017, compared to $36.0 million for the nine months ended September 30, 2016.
Cash collections were $1,136.3 million for the nine months ended September 30, 2017, compared to $1,143.2 million for the nine months ended September 30, 2016, a decrease of $6.9 million, or 0.6%.2022. The decrease in cash collections was mainly caused by a decrease in our Americas Insolvency portfolio collections, which decreased $33.4 million or 17.0%, due primarily to lower volumes of purchasing during 2014 to 2016. This was partially offset by increases in our Americas Core and European cash collections. Cash collections on fully amortized pools were $40.2 million in the nine months ended September 30, 2017, up $15.1 million or 60.2%, compared to $25.1 million in the nine months ended September 30, 2016. Cash collections on pools on cost recovery were $25.0 million in the nine months ended September 30, 2017, up $3.2 million or 14.7%, compared to $21.8 million in the nine months ended September 30, 2016.


For the nine months ended September 30, 2017, we recorded net allowance charges of $9.4 million, consisting of $4.8 million on our Americas Core portfolios and $1.1 million on our Americas Insolvency portfolios. We also recorded net allowance charges of $3.5 million on our European portfolios. For the nine months ended September 30, 2016, we recorded net allowance charges of $36.0 million, consisting of $32.3 million on our Americas Core portfolios and $0.3 million on our Americas Insolvency portfolios. We also recorded net allowance charges of $3.4 million on our European portfolios.
During the nine months ended September 30, 2017 and 2016, the Company reclassified $93.3 million and $95.9 million, respectively, from nonaccretable difference to accretable yield due primarily to increased cash collection forecasts relating mainly to certain Americas Core pools, Americas Insolvency pools and European Core pools during the nine months ended September 30, 2017, and certain Americas Insolvency pools and European Core pools during the nine months ended September 30, 2016.
Fee Income
Fee income was $18.9 million in the nine months ended September 30, 2017, a decrease of $37.3 million or 66.4%, compared to $56.2 million in the nine months ended September 30, 2016. Thistax expense was primarily due to a decrease in feelower income resulting frombefore taxes during the sale of our government services businesses in January 2017 and the sale of PLS in June 2017.
Other Revenue
Other revenue increased to $6.4 million in the ninesix months ended SeptemberJune 30, 2017 from $6.0 million in the nine months ended September 30, 2016, primarily due to an increase in revenue generated by our investments.
Operating Expenses
Operating expenses were $452.1 million for the nine months ended September 30, 2017, a decrease of $12.12023, which decreased $162.3 million, or 2.6%, compared to operating expenses of $464.2 million for the nine months ended September 30, 2016.
Compensation and Employee Services
Compensation and employee services expenses were $203.8 million for the nine months ended September 30, 2017, an increase of $6.3 million, or 3.2% compared to compensation and employee services expenses of $197.5 million for the nine months ended September 30, 2016. Compensation expense increased primarily as a result of larger average staff sizes, partially offset by a decrease resulting from the sale of our government services businesses in January 2017 and the sale of PLS in June 2017. In the U.S., we have hired approximately 700 net new collectors since September 30, 2016. Total full-time equivalents increased to 4,555 as of September 30, 2017, compared to 3,859 as of September 30, 2016.
Legal Collection Expenses
Legal collection expenses were $90.6 million for the nine months ended September 30, 2017, a decrease of $6.9 million, or 7.1%, compared to legal collection expenses of $97.5 million for the nine months ended September 30, 2016. The decrease was primarily due to a decrease in legal collection expenses paid to third-party attorneys, primarily as a result of a decrease in domestic external legal collections. Our costs paid to third-party attorneys were $33.3 million for the nine months ended September 30, 2017, a decrease of $4.1 million or 11.0% compared to $37.4 million for the nine months ended September 30, 2016. Additionally, our costs paid to sellers of nonperforming loans for documents were $1.0 million for the nine months ended September 30, 2017, a decrease of $3.0 million or 75.0% compared to $4.0 million for the nine months ended September 30, 2016. The decrease was primarily the result of sellers providing more account documents to us when we purchase portfolios, mainly as a result of regulatory requirements. This was offset by an increase in costs paid to courts where a lawsuit is filed mainly related to the expansion of the number of accounts brought into the legal channel in Europe during the nine months ended September 30, 2017. Our costs paid to courts were $56.3 million for the nine months ended September 30, 2017, an increase of $0.2 million or 0.4% compared to $56.1 million for the nine months ended September 30, 2016.
Agency Fees
Agency fees were $27.7 million for the nine months ended September 30, 2017, compared to $34.2 million for the nine months ended September 30, 2016. The decrease was primarily due to the impact of the sale of PLS in June 2017 and a decrease in third-party collection fees incurred by our foreign operations.
Outside Fees and Services
Outside fees and services expenses were $47.0 million for the nine months ended September 30, 2017, an increase of $0.6 million, or 1.3%, compared to outside fees and services expenses of $46.4 million for the nine months ended September 30,


2016.175.5%. The increase was primarily the result of a $1.1 million increase in payment processing fees and database fees. This was partially offset by a $0.5 million decrease in consulting and other outside professional fees.
Communication
Communication expenses were $25.1 million for the nine months ended September 30, 2017, a decrease of $1.0 million, or 3.8%, compared to communication expenses of $26.1 million for the nine months ended September 30, 2016. This decrease was primarily due to the impact of the sale of our government services businesses in January 2017.
Rent and Occupancy
Rent and occupancy expenses were $10.8 million for the nine months ended September 30, 2017, a decrease of $0.9 million, or 7.7%, compared to rent and occupancy expenses of $11.7 million for the nine months ended September 30, 2016. The decrease was primarily due to the impact of the sale of our government services businesses in January 2017 and the sale of PLS in June 2017.
Depreciation and Amortization
Depreciation and amortization expenses were $15.1 million for the nine months ended September 30, 2017, a decrease of $3.2 million, or 17.5%, compared to depreciation and amortization expenses of $18.3 million for the nine months ended September 30, 2016. The decrease was primarily due to the impact of the sale of our government services businesses in January 2017.
Other Operating Expenses
Other operating expenses were $32.1 million for the nine months ended September 30, 2017, a decrease of $0.3 million, or 0.9%, compared to other operating expenses of $32.4 million for the nine months ended September 30, 2016.
Gain on Sale of Subsidiaries
Gain on sale of subsidiaries was $48.5 million for the nine months ended September 30, 2017 compared to $0 for the nine months ended September 30, 2016. During the nine months ended September 30, 2017, we sold our government services businesses and PLS which resulted in gains of $46.9 million and $1.6 million, respectively.
Interest Expense, Net
Interest expense, net was $69.7 million for the nine months ended September 30, 2017, an increase of $9.9 million or 16.6%, compared to $59.8 million for the nine months ended September 30, 2016. The increase was primarily due to the additional interest incurred as a result of the issuance of our new convertible senior notes, which we issued and sold on May 26, 2017, as well as increases in interest rates and unused line fees. This was partially offset by a decrease in interest expense caused by our interest rate swaps and a decrease in the average borrowings outstanding on our revolving credit facilities and term loans.

Interest expense, net consisted of the following for the nine months ended September 30, 2017 and 2016 (amounts in thousands):
 Nine months ended September 30,
 2017 2016 Change
Stated interest on debt obligations and unused line fees$52,863
 $45,429
 $7,434
Coupon interest on convertible debt10,695
 6,468
 4,227
Amortization of convertible debt discount5,760
 3,336
 2,424
Amortization of loan fees and other loan costs7,068
 6,187
 881
Interest rate swap agreements(2,445) 2,287
 (4,732)
Interest income(4,279) (3,869) (410)
Interest expense, net$69,662
 $59,838
 $9,824


Net Foreign Currency Transaction (Losses)/Gains
Net foreign currency transaction losses were $1.4 million for the nine months ended September 30, 2017 compared to net foreign currency transaction gains of $5.2 million for the nine months ended September 30, 2016. In any given period, our foreign entities conduct operations in currencies different from their functional currency which generate foreign currency transaction gains and losses.
Provision for Income Taxes
Provision for income taxes was $52.9 million for the nine months ended September 30, 2017, an increase of $2.7 million, or 5.4%, compared to provision for income taxes of $50.2 million for the nine months ended September 30, 2016. The increase was primarily due to an increase in our effective tax rate. During the nine months ended September 30, 2017, our effective tax rate was 39.7%, comparedmainly due to 32.2% for full year 2016. The increase was due primarily to changesa change in the mix of projected taxable income between tax jurisdictions caused in large part by gains on sales of subsidiaries and to an increase in the estimated blended rate for U.S. state taxes which was caused by changes in the mix of earnings, dispositions of subsidiaries, and other factors. This was partially offset by a decrease in income before income taxes of $23.3 million, or 14.9%, for the nine months ended September 30, 2017, compared to the nine months ended September 30, 2016.

total discrete items.

35

Supplemental Performance Data
Finance Receivables Portfolio Performance
The following tables show certain data related to our finance receivables portfolio. Certain adjustments, as noted inWe 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 footnotes to these tables, have been made to reducestatus of the impactaccount upon acquisition. In addition, the accounts are segregated into geographical regions based upon where the account was acquired. Ultimately, accounts are aggregated into annual pools based on portfolio segment, geography, and year of foreign currency fluctuations on ERC and purchase price multiples.
These tables disclose our Americas and European Core and Insolvency portfolios. The accounts represented in the Insolvency tables are those portfoliosacquisition.Portfolios of accounts that were in an insolvency status at the time of purchase. This contrasts withacquisition are represented in the Insolvency tables below.All other acquisitions of portfolios of accounts are included in our Core portfolios that fileportfolio tables as represented below.Once an account is initially segregated, it is not later transferred from an Insolvency pool to a Core pool or vice versa, and the account continues to be accounted for bankruptcy/as originally segregated regardless of any future changes in operational status. Specifically, if a Core account files for bankruptcy or insolvency protection after we purchase them, which continue to be tracked in their corresponding Core portfolio. Core customers sometimes file for bankruptcy/insolvency protection subsequent to our purchase of the related Core portfolio. When this occurs,acquisition, we adjust our collection practices accordingly to comply with bankruptcy/any respective bankruptcy or insolvency rules and procedures;or policies; however, for accounting purposes, these accounts remainthe account remains in the related Core portfolio. Conversely, Insolvency accounts may bepool.In the event an insolvency account is dismissed from its bankruptcy or insolvency status whether voluntarily or involuntarily, subsequent to our purchase of the related Insolvency portfolio. Dismissal occurs when the terms of the bankruptcy are not met by the petitioner. When this occurs, we are typically free to pursue alternative collection outside of bankruptcy procedures;activities; however, for accounting purposes, these accounts remainthe account remains in the related Insolvency pool.
The purchase price multiple represents our estimate of total cash collections over the original purchase price of the portfolio. Purchase price multiples can vary over time due to a variety of factors, including pricing competition, supply levels, paper type, age of the receivablesaccounts acquired, mix of portfolios purchased, costs to collect, expected returns and changes in our operational efficiency.For example, increased pricing due to elevated levels of competition during the 2005 to 2008 periodor supply constraints negatively impactedimpacts purchase price multiples as we pay more to buy similar portfolios of our Corenonperforming loans.
Further, there is a direct relationship between the price we pay for a portfolio, compared to prior years. Conversely, during the 2009 to 2011 period, pricing disruptions occurred as a resultpurchase price multiple and the effective interest rate of the economic downturn. This created uniquepool.When we pay more for a portfolio, the purchase price multiple and advantageous purchasing opportunities, particularly within the Insolvency market, relativeeffective interest rates are generally lower. The opposite tends to the prior four years. Purchase price multiples can also vary amongoccur when we pay less for a portfolio. Certain types of finance receivables. For example, we generally incuraccounts have lower collection costs, on our Insolvency portfolio compared with our Core portfolio. This allows us, in general, toand we generally pay more for an Insolvency portfolio and experiencethese types of accounts, resulting in a lower purchase price multiples,multiple, while generatingrealizing similar net income margins when compared with a Core portfolio.
When competition increases and/or supply decreases, pricing often becomes negatively impacted relative to expected collections, and yields tend to trend lower. The opposite tends to occur when competition decreases and/or supply increases.
other portfolio purchases. Within a given portfolio type, to the extent that lower purchase price multiples are the result of more competitive pricing, and lower yields, this will generally lead to higher amortization rates and lower profitability. 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 receivables,accounts, which impact the cost to collect those accounts. Fresher accounts, for example, typically carry lower associated collection expenses,costs, while older accounts and lower balance accounts typically carry higher costs and, as a result, require higher purchase price multiples to achieve the same net profitability as fresher accounts.paper.
Revenue recognition under Financial Accounting Standards Board ("FASB") Accounting Standards Codification 310-30, "Loans and Debt Securities Acquired with Deteriorated Credit Quality" ("ASC 310-30") is driven by estimates of total collections as well as the amount and timing of thosefuture cash collections. We record new portfolio purchases based on our best estimate ofacquisitions at the cash flows expected at acquisition,purchase price, which reflects the uncertainties inherent inamount we expect to collect discounted at an effective interest rate. During the year of acquisition, portfolios are aggregated into annual pools, and the blended effective interest rate will change to reflect new buying and new cash flow estimates until the end of the year. At that time, the purchase price amount is fixed at the aggregated amounts paid to acquire the portfolio, the effective interest rate is fixed at the amount we expect to collect, discounted at the rate to equate purchase price to the recovery estimate, and the currency rates are fixed for purposes of nonperforming loanscomparability in future periods.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 underwriting process. Subsequentcash 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 adjust our purchase price multiples. Following the initial booking,years, as we gain collection experience and confidence with a pool of accounts, we regularly update ERC. As a result,may begin to increase our estimate of total collectionspurchase price multiples.Over time, our TEC has often increased as pools have aged. These processes have tended to causeaged resulting in the ratio of ERCTEC to purchase price for any given year of buying to gradually increase over time.increase. Thus, all factors being equal in terms of pricing, one would typically tend to see a higher collection to purchase price ratio from a pool of accounts that was six years from purchaseacquisition than a pool that was just two years from purchase.acquisition.
The numbers presented in the following tables represent gross cash collections and do not reflect any costs to collect; therefore, they may not represent relative profitability. 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 receivables.categories of portfolio segments and related geographies.
We hold a majority interest
36

Purchase Price Multiples
as of June 30, 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
1996-2012$1,541,896 $4,801,032 $35,742 311%238%
2013390,826 908,961 15,139 233%211%
2014404,117 875,120 23,495 217%204%
2015443,114 898,649 41,331 203%205%
2016455,767 1,075,028 75,099 236%201%
2017532,851 1,196,768 121,179 225%193%
2018653,975 1,463,790 175,567 224%202%
2019581,476 1,292,608 228,655 222%206%
2020435,668 947,717 266,397 218%213%
2021435,846 779,861 454,830 179%191%
2022406,082 717,643 565,409 177%179%
2023290,363 543,178 521,588 187%187%
Subtotal6,571,981 15,500,355 2,524,431 
Americas Insolvency
1996-20121,038,223 2,146,538 141 207%165%
2013227,834 355,648 71 156%133%
2014148,420 218,724 198 147%124%
201563,170 87,934 144 139%125%
201691,442 117,589 300 129%123%
2017275,257 356,042 2,196 129%125%
201897,879 136,240 7,243 139%127%
2019123,077 168,530 31,391 137%128%
202062,130 90,253 37,232 145%136%
202155,187 73,503 41,973 133%136%
202233,442 46,367 39,066 139%139%
202327,890 37,711 36,646 135%135%
Subtotal2,243,951 3,835,079 196,601 
Total Americas and Australia8,815,932 19,335,434 2,721,032 
Europe Core
201220,409 44,201 — 217%187%
201320,334 27,152 1 134%119%
2014 (1)
773,811 2,376,921 364,157 307%208%
2015411,340 728,356 141,410 177%160%
2016333,090 569,221 174,415 171%167%
2017252,174 358,126 111,139 142%144%
2018341,775 542,585 211,437 159%148%
2019518,610 811,906 359,355 157%152%
2020324,119 557,541 280,147 172%172%
2021412,411 696,596 453,152 169%170%
2022359,447 579,891 512,047 161%162%
2023229,639 380,036 367,155 165%165%
Subtotal3,997,159 7,672,532 2,974,415 
Europe Insolvency
2014 (1)
10,876 18,759 — 172%129%
201518,973 29,137 29 154%139%
201639,338 57,203 879 145%130%
201739,235 51,448 2,859 131%128%
201844,908 52,496 7,939 117%123%
201977,218 111,099 27,995 144%130%
2020105,440 156,603 56,480 149%129%
202153,230 71,526 39,592 134%134%
202244,604 60,962 52,786 137%137%
202314,903 20,194 19,764 136%136%
Subtotal448,725 629,427 208,323 
Total Europe4,445,884 8,301,959 3,182,738 
Total PRA Group$13,261,816 $27,637,393 $5,903,770 
(1)    Includes finance receivables portfolios that were acquired through the acquisition of Aktiv Kapital AS in a closed-end Polish investment fund that purchases and services finance receivables. Our investment in this fund is classified2014 (as described in our consolidated balance sheets as "Investments" and as such is not included in2022 Form 10-K).
(2)Includes the following tables. The equivalentacquisition date finance receivables portfolios that were acquired through our business acquisitions.
(3)Non-U.S. amounts are presented at the exchange rate at the end of the estimated remaining collectionsyear in which the portfolio was purchased. In addition, any purchase price adjustments that occur throughout the life of the portfolios, expected to be received by us, was $61.3 millionportfolio are presented at Septemberthe 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 June 30, 2017.2023 exchange rate.

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




37

Purchase Price Multiples
as of September 30, 2017 
Amounts in thousands
Purchase Period
Purchase Price (1)(3)
Net Finance Receivables (4)
ERC-Historical Period Exchange Rates (5)
Total Estimated Collections (6)
ERC-Current Period Exchange Rates (7)
Current Estimated Purchase Price Multiple
Original Estimated Purchase Price Multiple (2)
Americas-Core       
1996-2006$458,635
$2,948
$16,991
$1,605,551
$16,991
350%246%
2007179,826
4,862
20,426
442,487
20,426
246%227%
2008166,444
5,088
16,869
374,936
16,869
225%220%
2009125,156
1,089
35,328
461,678
35,328
369%252%
2010148,210
4,720
55,421
539,054
55,421
364%247%
2011209,654
14,337
77,717
723,855
77,717
345%245%
2012254,447
28,508
112,688
678,461
112,688
267%226%
2013391,612
82,257
244,721
971,832
244,721
248%211%
2014405,910
133,709
366,519
980,208
363,541
241%204%
2015445,198
209,558
460,239
951,890
463,015
214%205%
2016456,426
309,426
632,022
964,260
639,433
211%201%
2017377,203
356,961
668,675
728,881
668,889
193%193%
Subtotal3,618,721
1,153,463
2,707,616
9,423,093
2,715,039
  
Americas-Insolvency      
1996-200654,396
—
404
91,147
404
168%145%
200778,524
79
305
106,067
305
135%150%
2008108,578
469
979
168,971
979
156%163%
2009155,996
—
3,604
471,952
3,604
303%214%
2010208,963
—
5,017
548,234
5,017
262%184%
2011180,479
—
508
366,720
508
203%155%
2012251,471
—
4,504
386,491
4,504
154%136%
2013227,999
13,703
29,349
347,301
29,349
152%133%
2014148,769
33,306
49,021
210,471
48,975
141%124%
201563,223
36,365
45,053
81,445
45,053
129%125%
201692,486
57,870
69,697
112,436
70,216
122%123%
2017236,201
215,968
269,794
294,724
269,795
125%125%
Subtotal1,807,085
357,760
478,235
3,185,959
478,709
  
Total Americas5,425,806
1,511,223
3,185,851
12,609,052
3,193,748
  
Europe-Core       
201220,451
—
2,388
37,126
1,966
182%187%
201320,365
668
1,596
22,933
1,290
113%119%
2014797,808
349,722
1,112,324
2,072,020
1,003,317
260%208%
2015423,412
255,365
497,625
720,188
468,229
170%160%
2016348,867
302,569
488,745
587,387
516,385
168%167%
201797,295
94,865
140,656
150,084
147,488
154%154%
Subtotal1,708,198
1,003,189
2,243,334
3,589,738
2,138,675
  
Europe-Insolvency      
201410,876
2,529
6,608
18,393
6,223
169%129%
201519,418
8,994
16,654
28,872
15,044
149%139%
201642,222
30,030
41,601
57,791
42,764
137%130%
201721,402
21,866
26,793
27,142
27,643
127%127%
Subtotal93,918
63,419
91,656
132,198
91,674
  
Total Europe1,802,116
1,066,608
2,334,990
3,721,936
2,230,349
  
Total PRA Group$7,227,922
$2,577,831
$5,520,841
$16,330,988
$5,424,097
  
(1)The amount reflected in the Purchase Price also includes the acquisition date finance receivables portfolios that were acquired through our various business acquisitions.
(2)The Original Estimated Purchase Price Multiple represents the purchase price multiple at the end of the year of acquisition.
(3)For our international amounts, Purchase Price is presented at the exchange rate at the end of the quarter in which the pool was purchased. In addition, any purchase price adjustments that occur throughout the life of the pool are presented at the period-end exchange rate for the respective quarter of purchase.
(4)For our international amounts, Net Finance Receivables are presented at the September 30, 2017 exchange rate.
(5)For our international amounts, ERC-Historical Period Exchange Rates is presented at the period-end exchange rate for the respective quarter of purchase.
(6)For our international amounts, TEC is presented at the period-end exchange rate for the respective quarter of purchase.
(7)For our international amounts, ERC-Current Period Exchange Rates is presented at the September 30, 2017 exchange rate.



Portfolio Financial Information
Year-to-date as of June 30, 2023
Amounts in thousands
Purchase Period
Cash
Collections (2)
Portfolio Income (2)
Changes in Expected Recoveries (2)
Total Portfolio Revenue (2)
Net Finance Receivables as of June 30, 2023 (3)
Americas and Australia Core
1996-2012$9,407 $5,726 $2,165 $7,891 $8,736 
20135,018 2,074 1,691 3,765 6,184 
20146,072 2,647 1,592 4,239 8,721 
20157,298 4,546 (1,742)2,804 16,768 
201612,881 8,924 (2,923)6,001 24,568 
201724,012 14,002 (7,329)6,673 50,764 
201851,716 21,384 1,099 22,483 96,987 
201962,005 27,748 (3,330)24,418 123,803 
202071,291 31,280 (6,902)24,378 148,339 
202176,537 43,081 (28,614)14,467 240,168 
2022101,232 51,627 959 52,586 339,760 
202321,377 12,774 3,748 16,522 285,203 
Subtotal448,846 225,813 (39,586)186,227 1,350,001 
Americas Insolvency
1996-2012400 145 258 403 — 
2013142 71 71 142 — 
2014245 148 51 199 — 
2015178 69 44 113 74 
2016451 82 138 220 249 
20172,978 291 680 971 1,963 
20188,083 780 (1,051)(271)6,851 
201915,448 1,902 531 2,433 29,200 
202010,026 2,334 561 2,895 32,162 
20219,004 2,508 614 3,122 34,969 
20224,115 1,997 270 2,267 30,625 
20231,065 795 300 1,095 27,709 
Subtotal52,135 11,122 2,467 13,589 163,802 
Total Americas and Australia500,981 236,935 (37,119)199,816 1,513,803 
Europe Core
2012365 — 365 365 — 
2013181 — 181 181 — 
2014 (1)
55,192 35,710 7,687 43,397 102,679 
201517,749 8,435 275 8,710 77,966 
201615,146 7,950 (274)7,676 102,601 
201710,432 3,863 (734)3,129 76,915 
201821,311 7,788 1,290 9,078 140,472 
201938,976 12,329 9,440 21,769 246,350 
202029,367 11,374 (96)11,278 172,695 
202137,411 17,015 (4,298)12,717 273,361 
202244,445 17,762 (207)17,555 320,550 
202312,754 4,091 2,628 6,719 222,815 
Subtotal283,329 126,317 16,257 142,574 1,736,404 
Europe Insolvency
2014 (1)
128 — 128 128 — 
2015256 18 157 175 26 
2016875 149 214 363 651 
20172,461 162 491 653 2,663 
20183,909 397 (82)315 7,290 
20199,275 1,401 543 1,944 24,764 
202015,653 2,559 3,104 5,663 50,125 
20217,343 1,907 187 2,094 33,095 
20225,969 2,386 143 2,529 40,826 
2023424 301 201 502 14,901 
Subtotal46,293 9,280 5,086 14,366 174,341 
Total Europe329,622 135,597 21,343 156,940 1,910,745 
Total PRA Group$830,603 $372,532 $(15,776)$356,756 $3,424,548 
Portfolio Financial Information
Year-to-date as of September 30, 2017
Amounts in thousands
Purchase Period
Purchase Price (1)(3)
Cash
Collections (2)
Gross Revenue (2)
Amortization (2)
Allowance (2)
Net Revenue (2)
Net Finance Receivables as of September 30, 2017(4)
Americas-Core       
1996-2006$458,635
$6,116
$4,608
$1,508
$—
$4,608
$2,948
2007179,826
4,539
2,997
1,542
330
2,667
4,862
2008166,444
4,757
2,647
2,110
145
2,502
5,088
2009125,156
8,724
7,000
1,724
200
6,800
1,089
2010148,210
12,546
8,813
3,733
—
8,813
4,720
2011209,654
25,782
20,386
5,396
285
20,101
14,337
2012254,447
31,838
20,292
11,546
—
20,292
28,508
2013391,612
62,833
43,993
18,840
1,605
42,388
82,257
2014405,910
90,971
61,881
29,090
1,114
60,767
133,709
2015445,198
148,469
73,109
75,360
814
72,295
209,558
2016456,426
199,942
107,138
92,804
288
106,850
309,426
2017377,203
60,165
39,831
20,334
—
39,831
356,961
Subtotal3,618,721
656,682
392,695
263,987
4,781
387,914
1,153,463
Americas-Insolvency      
1996-200654,396
113
113
—
—
113
—
200778,524
148
77
71
—
77
79
2008108,578
251
105
146
100
5
469
2009155,996
1,284
1,284
—
—
1,284
—
2010208,963
1,966
1,913
53
20
1,893
—
2011180,479
3,135
3,135
—
—
3,135
—
2012251,471
26,053
16,825
9,228
—
16,825
—
2013227,999
37,763
10,210
27,553
—
10,210
13,703
2014148,769
28,976
7,818
21,158
(12)7,830
33,306
201563,223
15,106
3,141
11,965
—
3,141
36,365
201692,486
23,686
4,679
19,007
1,030
3,649
57,870
2017236,201
24,931
4,697
20,234
—
4,697
215,968
Subtotal1,807,085
163,412
53,997
109,415
1,138
52,859
357,760
Total Americas5,425,806
820,094
446,692
373,402
5,919
440,773
1,511,223
Europe-Core       
201220,451
1,501
1,501
—
—
1,501
—
201320,365
911
627
284
62
565
668
2014797,808
165,299
91,086
74,213
1,070
90,016
349,722
2015423,412
64,096
24,264
39,832
1,387
22,877
255,365
2016348,867
58,373
20,856
37,517
840
20,016
302,569
201797,295
9,703
2,877
6,826
—
2,877
94,865
Subtotal1,708,198
299,883
141,211
158,672
3,359
137,852
1,003,189
Europe-Insolvency      
201410,876
2,464
1,117
1,347
—
1,117
2,529
201519,418
3,875
1,014
2,861
134
880
8,994
201642,222
9,669
1,859
7,810
—
1,859
30,030
201721,402
354
145
209
—
145
21,866
Subtotal93,918
16,362
4,135
12,227
134
4,001
63,419
Total Europe1,802,116
316,245
145,346
170,899
3,493
141,853
1,066,608
Total PRA Group$7,227,922
$1,136,339
$592,038
$544,301
$9,412
$582,626
$2,577,831
(1)The amount reflected in the Purchase Price also includes the acquisition date finance receivables portfolios that were acquired through our various business acquisitions.
(2)
For our international amounts, Cash Collections are presented using the average exchange rates during the current reporting period.
(3)
For our international amounts, Purchase Price is presented at the exchange rate at the end of the quarter in which the pool was purchased. In addition, any purchase price adjustments that occur throughout the life of the pool are presented at the period-end exchange rate for the respective quarter of purchase.
(4)
For our international amounts, Net Finance Receivables are presented at the September 30, 2017 exchange rate.



The following table, which excludes any proceeds from cash sales of(1)    Includes finance receivables illustrate historicalportfolios that were acquired through the acquisition of Aktiv Kapital AS in 2014 (as described in our 2022 Form 10-K).
(2)Non-U.S. amounts are presented using the average exchange rates during the current reporting period.
(3)Non-U.S. amounts are presented at the June 30, 2023 exchange rate.



38

Cash Collections by Year, By Year of Purchase (1)
Year-to-date as of June 30, 2023
 Amounts in millions
Cash Collections
Purchase Period
Purchase Price (3)(4)
1996-201220132014201520162017201820192020202120222023Total
Americas and Australia Core
1996-2012$1,541.9 $2,962.4 $554.9 $412.5 $280.3 $178.9 $118.1 $83.8 $62.9 $41.5 $29.9 $23.5 $9.4 $4,758.1 
2013390.8 — 101.6 247.9 194.0 120.8 78.9 56.5 36.9 23.2 16.7 12.5 5.0 894.0 
2014404.1 — — 92.7 253.5 170.3 114.2 82.2 55.3 31.9 22.3 15.0 6.1 843.5 
2015443.1 — — — 117.0 228.4 185.9 126.6 83.6 57.2 34.9 19.5 7.3 860.4 
2016455.8 — — — — 138.7 256.5 194.6 140.6 105.9 74.2 38.4 12.9 961.8 
2017532.9 — — — — — 107.3 278.7 256.5 192.5 130.0 76.3 24.0 1,065.3 
2018654.0 — — — — — — 122.7 361.9 337.7 239.9 146.1 51.7 1,260.0 
2019581.5 — — — — — — — 143.8 349.0 289.8 177.7 62.0 1,022.3 
2020435.7 — — — — — — — — 132.9 284.3 192.0 71.3 680.5 
2021435.9 — — — — — — — — — 85.0 177.3 76.5 338.8 
2022406.1 — — — — — — — — — — 67.7 101.2 168.9 
2023290.4 — — — — — — — — — — — 21.4 21.4 
Subtotal6,572.2 2,962.4 656.5 753.1 844.8 837.1 860.9 945.1 1,141.5 1,271.8 1,207.0 946.0 448.8 12,875.0 
Americas Insolvency
1996-20121,038.2 1,021.6 417.3 338.8 208.3 105.4 37.7 8.3 3.9 2.3 1.4 1.1 0.4 2,146.5 
2013227.8 — 52.5 82.6 81.7 63.4 47.8 22.0 2.9 1.3 0.8 0.5 0.1 355.6 
2014148.4 — — 37.1 50.9 44.3 37.4 28.8 15.8 2.2 1.1 0.7 0.2 218.5 
201563.2 — — — 3.4 17.9 20.1 19.8 16.7 7.9 1.3 0.6 0.2 87.9 
201691.4 — — — — 18.9 30.4 25.1 19.9 14.4 7.4 1.8 0.5 118.4 
2017275.3 — — — — — 49.1 97.3 80.9 58.8 44.0 20.8 3.0 353.9 
201897.9 — — — — — — 6.7 27.4 30.5 31.6 24.6 8.1 128.9 
2019123.1 — — — — — — — 13.5 31.4 39.1 37.8 15.4 137.2 
202062.1 — — — — — — — — 6.5 16.1 20.4 10.0 53.0 
202155.2 — — — — — — — — — 4.6 17.9 9.0 31.5 
202233.4 — — — — — — — — — — 3.2 4.1 7.3 
202327.9 — — — — — — — — — — — 1.1 1.1 
Subtotal2,243.9 1,021.6 469.8 458.5 344.3 249.9 222.5 208.0 181.0 155.3 147.4 129.4 52.1 3,639.8 
Total Americas and Australia8,816.1 3,984.0 1,126.3 1,211.6 1,189.1 1,087.0 1,083.4 1,153.1 1,322.5 1,427.1 1,354.4 1,075.4 500.9 16,514.8 
Europe Core
201220.4 11.6 9.0 5.6 3.2 2.2 2.0 2.0 1.5 1.2 1.2 0.9 0.4 40.8 
201320.3 — 7.1 8.5 2.4 1.3 1.2 1.3 0.9 0.7 0.7 0.5 0.2 24.8 
2014 (2)
773.8 — — 153.2 292.0 246.4 220.8 206.3 172.9 149.8 149.3 122.2 55.2 1,768.1 
2015411.3 — — — 45.8 100.3 86.2 80.9 66.1 54.3 51.4 40.7 17.7 543.4 
2016333.1 — — — — 40.4 78.9 72.6 58.0 48.3 46.7 36.9 15.1 396.9 
2017252.2 — — — — — 17.9 56.0 44.1 36.1 34.8 25.2 10.4 224.5 
2018341.8 — — — — — — 24.3 88.7 71.3 69.1 50.7 21.3 325.4 
2019518.6 — — — — — — — 48.0 125.7 121.4 89.8 39.0 423.9 
2020324.1 — — — — — — — — 32.3 91.7 69.1 29.4 222.5 
2021412.4 — — — — — — — — — 48.5 89.9 37.4 175.8 
2022359.5 — — — — — — — — — — 33.9 44.4 78.3 
2023229.6 — — — — — — — — — — — 12.8 12.8 
Subtotal3,997.1 11.6 16.1 167.3 343.4 390.6 407.0 443.4 480.2 519.7 614.8 559.8 283.3 4,237.2 
Europe Insolvency
2014 (2)
10.9 — — — 4.3 3.9 3.2 2.6 1.6 0.8 0.3 0.2 0.1 17.0 
201519.0 — — — 3.0 4.4 5.0 4.8 3.9 2.9 1.6 0.7 0.3 26.6 
201639.3 — — — — 6.2 12.7 12.9 10.7 8.0 6.0 2.7 0.9 60.1 
201739.2 — — — — — 1.2 7.9 9.2 9.8 9.4 6.5 2.5 46.5 
201844.9 — — — — — — 0.6 8.4 10.3 11.7 9.8 3.9 44.7 
201977.2 — — — — — — — 5.0 21.1 23.9 21.0 9.3 80.3 
2020105.4 — — — — — — — — 6.1 34.7 34.1 15.7 90.6 
202153.2 — — — — — — — — — 5.5 14.4 7.3 27.2 
202244.6 — — — — — — — — — — 4.5 6.0 10.5 
202314.9 — — — — — — — — — — — 0.4 0.4 
Subtotal448.6 — — — 7.3 14.5 22.1 28.8 38.8 59.0 93.1 93.9 46.4 403.9 
Total Europe4,445.7 11.6 16.1 167.3 350.7 405.1 429.1 472.2 519.0 578.7 707.9 653.7 329.7 4,641.1 
Total PRA Group$13,261.8 $3,995.6 $1,142.4 $1,378.9 $1,539.8 $1,492.1 $1,512.5 $1,625.3 $1,841.5 $2,005.8 $2,062.3 $1,729.1 $830.6 $21,155.9 
(1)Non-U.S. amounts are presented using the average exchange rates during the cash collections, bycollection period.
(2)Includes finance receivables portfolios that were acquired through the acquisition of Aktiv Kapital AS in 2014 (as described in our 2022 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 on our portfolios.in which the portfolio was purchased. 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.

39
Cash Collections by Year, By Year of Purchase (2) 
as of September 30, 2017 
Amounts in thousands
  Cash Collections
Purchase Period
Purchase Price (1)(3)
1996-
2006		20072008200920102011201220132014201520162017Total
Americas-Core             
1996-2006$458,635
$861,003
$195,738
$135,589
$99,674
$77,459
$64,555
$49,820
$35,711
$25,488
$18,293
$11,862
$6,116
$1,581,308
2007179,826
—
39,412
87,039
69,175
60,230
50,996
39,585
28,244
19,759
14,198
8,883
4,539
422,060
2008166,444
—
—
47,253
72,080
62,363
53,654
42,850
31,307
21,027
13,786
8,989
4,757
358,066
2009125,156
—
—
—
40,703
95,627
84,339
69,385
51,121
35,555
24,896
16,000
8,724
426,350
2010148,210
—
—
—
—
47,076
113,554
109,873
82,014
55,946
38,110
24,515
12,546
483,634
2011209,654
—
—
—
—
—
61,971
174,461
152,908
108,513
73,793
48,711
25,782
646,139
2012254,447
—
—
—
—
—
—
56,901
173,589
146,198
97,267
59,981
31,838
565,774
2013391,612
—
—
—
—
—
—
—
101,614
247,849
194,026
120,789
62,833
727,111
2014405,910
—
—
—
—
—
—
—
—
92,660
253,448
170,311
90,971
607,390
2015445,198
—
—
—
—
—
—
—
—
—
116,951
228,432
148,469
493,852
2016456,426
—
—
—
—
—
—
—
—
—
—
138,723
199,942
338,665
2017377,203
—
—
—
—
—
—
—
—
—
—
—
60,165
60,165
Subtotal3,618,721
861,003
235,150
269,881
281,632
342,755
429,069
542,875
656,508
752,995
844,768
837,196
656,682
6,710,514
Americas-Insolvency             
1996-200654,396
34,138
24,166
14,822
8,212
4,518
2,141
1,023
678
437
302
193
113
90,743
200778,524
—
2,850
27,972
25,630
22,829
16,093
7,551
1,206
714
500
270
148
105,763
2008108,578
—
—
14,024
35,894
37,974
35,690
28,956
11,650
1,884
1,034
635
251
167,992
2009155,996
—
—
—
16,635
81,780
102,780
107,888
95,725
53,945
5,781
2,531
1,284
468,349
2010208,963
—
—
—
—
39,486
104,499
125,020
121,717
101,873
43,649
5,008
1,966
543,218
2011180,479
—
—
—
—
—
15,218
66,379
82,752
85,816
76,915
35,996
3,135
366,211
2012251,471
—
—
—
—
—
—
17,388
103,610
94,141
80,079
60,715
26,053
381,986
2013227,999
—
—
—
—
—
—
—
52,528
82,596
81,679
63,386
37,763
317,952
2014148,769
—
—
—
—
—
—
—
—
37,045
50,880
44,313
28,976
161,214
201563,223
—
—
—
—
—
—
—
—
—
3,395
17,892
15,106
36,393
201692,486
—
—
—
—
—
—
—
—
—
—
18,869
23,686
42,555
2017236,201
—
—
—
—
—
—
—
—
—
—
—
24,931
24,931
Subtotal1,807,085
34,138
27,016
56,818
86,371
186,587
276,421
354,205
469,866
458,451
344,214
249,808
163,412
2,707,307
Total Americas5,425,806
895,141
262,166
326,699
368,003
529,342
705,490
897,080
1,126,374
1,211,446
1,188,982
1,087,004
820,094
9,417,821
Europe-Core             
201220,451
—
—
—
—
—
—
11,604
8,995
5,641
3,175
2,198
1,501
33,114
201320,365
—
—
—
—
—
—
—
7,068
8,540
2,347
1,326
911
20,192
2014797,808
—
—
—
—
—
—
—
—
153,180
291,980
246,365
165,299
856,824
2015423,412
—
—
—
—
—
—
—
—
—
45,760
100,263
64,096
210,119
2016348,867
—
—
—
—
—
—
—
—
—
—
40,368
58,373
98,741
201797,295
—
—
—
—
—
—
—
—
—
—
—
9,703
9,703
Subtotal1,708,198
—
—
—
—
—
—
11,604
16,063
167,361
343,262
390,520
299,883
1,228,693
Europe-Insolvency            
201410,876
—
—
—
—
—
—
—
—
5
4,297
3,921
2,464
10,687
201519,418
—
—
—
—
—
—
—
—
—
2,954
4,366
3,875
11,195
201642,222
—
—
—
—
—
—
—
—
—
—
6,175
9,669
15,844
201721,402
—
—
—
—
—
—
—
—
—
—
—
354
354
Subtotal93,918
—
—
—
—
—
—
—
—
5
7,251
14,462
16,362
38,080
Total Europe1,802,116
—
—
—
—
—
—
11,604
16,063
167,366
350,513
404,982
316,245
1,266,773
Total PRA Group$7,227,922
$895,141
$262,166
$326,699
$368,003
$529,342
$705,490
$908,684
$1,142,437
$1,378,812
$1,539,495
$1,491,986
$1,136,339
$10,684,594

(1)
The amount reflected in the Purchase Price also includes the acquisition date finance receivables portfolios that were acquired through our various business acquisitions.
(2)
For our international amounts, Cash Collections are presented using the average exchange rates during the cash collection period.
(3)
For our international amounts, Purchase Price is presented at the exchange rate at the end of the quarter in which the portfolio was purchased. In addition, any purchase price adjustments that occur throughout the life of the pool are presented at the period end exchange rate for the respective quarter of purchase.


Estimated Remaining Collections
The following chart shows our ERC of $5,903.8 million at June 30, 2023 by geographical region (amounts in millions).
5708
The following chart shows our ERC by geographical regionyear for the 12 month periods ending June 30 in each of the years presented below. The forecast amounts reflect our estimate at SeptemberJune 30, 20172023 of how much we expect to collect on our portfolios. These estimates are translated to U.S. dollars at the June 30, 2023 exchange rate.
5998





40

The following table displays our ERC by year for the 12 month periods ending June 30 in each of the years presented below, by year, by geography as of June 30, 2023 (amounts in millions)thousands).
chart-9455cbf03275582584da01.jpg
ERC By Year, By Geography
Americas and Australia CoreAmericas InsolvencyEurope CoreEurope InsolvencyTotal
2024$792,577 $82,834 $510,595 $77,190 $1,463,196 
2025580,633 54,370 424,304 56,380 1,115,687 
2026378,940 32,775 353,408 36,217 801,340 
2027253,996 17,552 299,477 21,052 592,077 
2028175,542 7,915 256,456 10,704 450,617 
2029122,563 1,138 220,835 4,527 349,063 
203086,576 17 186,025 1,108 273,726 
203161,573 — 157,052 272 218,897 
203241,917 — 133,970 229 176,116 
203327,147 — 111,893 191 139,231 
Thereafter2,967 — 320,400 453 323,820 
$2,524,431 $196,601 $2,974,415 $208,323 $5,903,770 
Seasonality
CashCustomer 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. Typically cash collections in the Americas tend to be higher in the first and second quartershalf of the year and lower indue to the third and fourth quartershigh volume of the year; cash collections in Europe tend to be higher in the third and fourth quarters of the year. Customer payment patterns are affected by seasonal employment trends, income tax refunds received by individuals in the U.S., and holiday spending habits geographically.trend lower as the year progresses. In the first quarter of 2023 and the first half of 2022, this seasonal trend was not as pronounced.
Cash Collections
The following table displays our quarterly cash collections by geography and portfolio type for the periods indicated.indicated (amounts in thousands).
Cash Collections by Geography and Type
Amounts in thousands
 2017 2016 2015
 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4
Americas-Core$212,756
 $217,020
 $226,906
 $193,360
 $210,524
 $213,741
 $219,571
 $195,835
Americas-Insolvency60,436
 53,163
 49,813
 52,988
 60,429
 67,745
 68,646
 73,842
Europe-Core102,681
 99,121
 98,081
 97,429
 96,028
 102,972
 94,091
 97,149
Europe-Insolvency5,961
 5,371
 5,030
 4,974
 4,719
 2,744
 2,025
 2,545
Total Cash Collections$381,834
 $374,675
 $379,830
 $348,751
 $371,700
 $387,202
 $384,333
 $369,371
Cash Collections by Geography and Type
202320222021
Q2Q1Q4Q3Q2Q1Q4Q3
Americas and Australia Core$220,886 $227,960 $205,619 $225,775 $244,377 $270,284 $257,705 $276,691 
Americas Insolvency26,384 25,751 27,971 31,911 34,278 35,209 36,851 37,464 
Europe Core149,324 134,005 134,016 132,072 142,470 151,162 155,853 151,625 
Europe Insolvency22,725 23,568 24,051 22,586 22,935 24,325 23,262 22,574 
Total Cash Collections$419,319 $411,284 $391,657 $412,344 $444,060 $480,980 $473,671 $488,354 
The following tablestable provides additional details on the composition of our U.S. Core cash collections for the periods indicated.indicated (amounts in thousands).
 Cash Collections by Source - Core Portfolios Only
202320222021
Q2Q1Q4Q3Q2Q1Q4Q3
Call Center and Other Collections$231,183 $236,415 $216,182 $235,832 $260,764 $291,266 $283,606 $298,717 
External Legal Collections53,439 54,934 48,925 49,243 50,996 55,179 55,760 54,445 
Internal Legal Collections85,588 70,616 74,528 72,772 75,087 75,001 74,192 75,154 
Total Core Cash Collections$370,210 $361,965 $339,635 $357,847 $386,847 $421,446 $413,558 $428,316 

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Domestic Portfolio Core Cash Collections by Source
Amounts in thousands
 2017 2016 2015
 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4
Call Center and Other Collections$123,009
 $122,780
 $127,368
 $103,595
 $115,454
 $119,568
 $127,851
 $108,979
External Legal Collections35,042
 37,863
 40,267
 35,231
 36,415
 40,369
 43,203
 42,432
Internal Legal Collections31,761
 32,511
 34,937
 31,458
 33,206
 34,505
 39,080
 38,998
Total Domestic Core Cash Collections$189,812
 $193,154
 $202,572
 $170,284
 $185,075
 $194,442
 $210,134
 $190,409



Collections Productivity (Domestic(U.S. Portfolio)
The following tables displaytable displays a collections productivity measures that we track.measure for our U.S. Portfolios for the periods indicated.
Cash Collections per Collector Hour Paid
U.S. Portfolio
Call center and other cash collections (1)
20232022202120202019
First Quarter$207 $261 $279 $172 $139 
Second Quarter199 226 270 263 139 
Third Quarter— 210 242 246 124 
Fourth Quarter— 186 232 204 128 
Cash Collections per Collector Hour Paid
Domestic Portfolio
 
Total domestic core cash collections (1)
 2017 2016 2015 2014 2013
First Quarter$254
 $274
 $247
 $223
 $193
Second Quarter202
 269
 245
 220
 190
Third Quarter191
 281
 250
 217
 191
Fourth Quarter—
 248
 239
 203
 190
          
 
Call center and other cash collections (2)
 2017 2016 2015 2014 2013
First Quarter$161
 $168
 $143
 $119
 $107
Second Quarter129
 167
 141
 107
 104
Third Quarter125
 177
 145
 112
 104
Fourth Quarter—
 153
 139
 110
 100
(1)Represents total cash collections less internal legal cash collections, external legal cash collections, and insolvency cash collections from trustee-administered accounts.
(1)
Represents total cash collections less Insolvency cash collections from trustee-administered accounts. This metric includes cash collections from Insolvency accounts administered by the Core call centers as well as cash collections generated by our internal staff of legal collectors. This calculation does not include hours paid to our internal staff of legal collectors or to employees processing the required notifications to trustees on Insolvency accounts.

Cash Efficiency Ratio
The following table displays our cash efficiency ratio for the periods indicated.
Cash Efficiency Ratio (1)
20232022202120202019
First Quarter54.3%65.1%68.0%61.5%59.2%
Second Quarter61.261.366.868.760.4
Third Quarter—58.462.465.660.2
Fourth Quarter—58.663.561.959.7
Full Year—61.065.364.559.9
(1) Calculated by dividing cash receipts less operating expenses by cash receipts.

(2)
Represents total cash collections less internal legal cash collections, external legal cash collections, and Insolvency cash collections from trustee-administered accounts.
Portfolio PurchasingAcquisitions
The following graph shows the purchase price of our portfolios by year since 2007.2013. It also includes the acquisition date finance receivableof nonperforming loan portfolios that were acquired through our various business acquisitions.
chart-e08aeb6096fd5bfdad3a01.jpg
Our ability to profitably purchase and liquidate pools of Insolvency accounts provides diversity to our nonperforming loan purchasing business. Although we generally purchase Insolvency portfolios from many of the same consumer lenders from whom we acquire Core customer portfolios, the volumes and pricing characteristics as well as the competitors are different. Based upon market dynamics, the profitability of portfolios purchased in the Insolvency and Core markets may differ over time. We have found periods when Insolvency accounts were more profitable and other times when Core accounts were more profitable. When pricing becomes more competitive due to reduced portfolios available for purchase or increased demand from competitors entering or increasing their presence in the market, prices tend to go up, driving down the purchase price multiples and lowering the overall expected returns. When pricing relaxes due to market dynamics, purchase price multiples tend to increase, thereby increasing the expected returns.


In order to collect our Core portfolios, we generally need to employ relatively higher amounts of labor and incur additional collection costs to generate each dollar of cash collections as compared with Insolvency portfolios. In order to achieve acceptable levels of net return on investment (after direct expenses), we are generally targeting a higher Total Estimated Collections to purchase price multiple for Core portfolios. On the other hand, Insolvency accounts generate the majority of their cash collections The 2023 total represents portfolio acquisitions through the efforts of insolvency courts and trustees. In this process, cash is remitted to our Company with no corresponding cost other thansix months ended June 30, 2023 while the cost of filing claims atprior year totals are for the time of purchase, court fees associatedfull year.
7801
*    2014 includes portfolios acquired in connection with the filingacquisition of ownership claim transfers and general administrative costs for monitoring the progress of each account through the insolvency process. As a result, collection costs are much lower for us when liquidating a pool of Insolvency accounts as compared to a pool of Core accounts, but conversely the price we pay for Insolvency accounts is generally higher than Core accounts. We generally target similar net income margins for Insolvency and Core portfolios at any given pointAktiv Kapital AS in the market cycles. However, because of the lower related collection costs, we can pay more for Insolvency portfolios, which causes the Total Estimated Collections to purchase price multiples of Insolvency pools generally to be lower. In summary, compared to a similar investment2014 (as described in a pool of Core accounts, to the extent both pools had identical targeted net income margins, the Insolvency pool would be expected to generate less revenue, less direct expenses, similar operating income, and a higher operating margin. From time to time, especially in Europe, we purchase Core portfolios which consist of a majority of previously charged-off accounts which are now paying based on established payment plans. These portfolios have some of the same financial dynamics as Insolvency accounts, with lower collection costs and lower purchase price multiples.our 2022 Form 10-K).
We utilize a long-term approach to collecting our receivables. This approach has historically caused us to realize significant cash collections and revenues from purchased portfolios of finance receivables years after they are originally acquired. As a result, we have in the past been able to temporarily reduce our level of current period acquisitions without a material negative current period impact on cash collections and revenue.
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The following table displays our quarterly portfolio purchasesacquisitions for the periods indicated.indicated (amounts in thousands).
Portfolio Purchases by Geography and Type
Amounts in thousands
 2017 2016 2015
 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4
Americas-Core$115,572
 $144,871
 $115,166
 $91,800
 $95,452
 $130,529
 $136,057
 $120,554
Americas-Insolvency73,497
 100,040
 67,123
 20,929
 16,760
 33,723
 22,952
 20,589
Europe-Core14,695
 42,876
 39,505
 80,129
 34,240
 68,835
 171,038
 79,735
Europe-Insolvency7,146
 7,860
 6,020
 6,943
 14,803
 16,410
 6,731
 4,976
Total Portfolio Purchases$210,910
 $295,647
 $227,814
 $199,801
 $161,255
 $249,497
 $336,778
 $225,854
Portfolio Acquisitions by Geography and Type
202320222021
Q2Q1Q4Q3Q2Q1Q4Q3
Americas and Australia Core$171,440 $116,867 $118,581 $100,780 $99,962 $90,639 $90,263 $162,451 
Americas Insolvency12,189 15,701 8,967 8,988 6,369 9,118 21,183 9,878 
Europe Core136,834 90,454 140,011 59,426 123,814 38,764 60,430 212,194 
Europe Insolvency7,296 7,203 20,535 13,910 1,202 8,929 29,820 7,424 
Total Portfolio Acquisitions$327,759 $230,225 $288,094 $183,104 $231,347 $147,450 $201,696 $391,947 
Portfolio PurchasesAcquisitions by Stratifications (DomesticStratification (U.S. Only)
The following table categorizes our quarterly domesticU.S. portfolio purchasesacquisitions for the periods indicated into major asset type and delinquency category. Over the past 20 years,Since our inception in 1996, we have acquired more than 46nearly 61 million customercustomer accounts in the U.S. alone.(amounts in thousands).
U.S Portfolio Acquisitions by Major Asset Type
20232022
Q2Q1Q4Q3Q2
Major Credit Cards$41,605 28.5 %$13,234 12.1 %$10,242 11.7 %$10,236 15.8 %$20,673 26.7 %
Private Label Credit Cards76,306 52.4 66,652 60.9 60,380 69.0 44,727 68.8 52,368 67.4 
Consumer Finance26,809 18.4 28,051 25.6 16,366 18.7 9,396 14.4 2,062 2.7 
Auto Related1,012 0.7 1,481 1.4 515 0.6 630 1.0 2,443 3.2 
Total$145,732 100.0 %$109,418 100.0 %$87,503 100.0 %$64,989 100.0 %$77,546 100.0 %

U.S. Portfolio Acquisitions by Delinquency Category
20232022
Q2Q1Q4Q3Q2
Fresh (1)
$89,767 67.2 %$70,053 74.8 %$55,117 70.2 %$30,510 54.5 %$28,235 39.7 %
Primary (2)
5,378 4.0 3,863 4.1 511 0.7 587 1.0 369 0.5 
Secondary (3)
25,800 19.3 17,789 19.0 21,620 27.5 19,886 35.5 28,148 39.5 
Other (4)
12,598 9.5 2,012 2.1 1,288 1.6 5,018 9.0 14,425 20.3 
Total Core133,543 100.0 %93,717 100.0 %78,536 100.0 %56,001 100.0 %71,177 100.0 %
Insolvency12,189 15,701 8,967 8,988 6,369 
Total$145,732 $109,418 $87,503 $64,989 $77,546 
(1)Fresh accounts are typically past due 120 to 270 days, charged-off by the credit originator and sold prior to any post-charge-off collection activity.
(2)Primary accounts are typically 240 to 450 days past due, charged-off and have been previously placed with one contingent fee servicer.
(3)Secondary accounts are typically 360 to 630 days past due, charged-off and have been previously placed with two contingent fee servicers.
(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"). 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. 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
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Domestic Portfolio Purchases by Major Asset Type
Amounts in thousand
 2017 2016 2015
 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4
Major Credit Cards$54,892
 $65,177
 $57,615
 $35,306
 $38,858
 $48,471
 $68,072
 $32,734
Consumer Finance3,308
 7,354
 7,987
 5,678
 1,309
 1,616
 2,533
 2,616
Private Label Credit Cards78,609
 101,162
 73,473
 56,681
 54,969
 86,331
 62,104
 93,660
Auto Related49,741
 67,701
 30,191
 6,104
 —
 831
 411
 7,032
Total$186,550
 $241,394
 $169,266
 $103,769
 $95,136
 $137,249
 $133,120
 $136,042
similar financial measures. Adjusted EBITDA should not be considered as an alternative to net income determined in accordance with GAAP. In addition, our calculation of Adjusted EBITDA may not be comparable to the calculation of similarly titled measures presented by other companies.

Adjusted EBITDA is calculated starting with our GAAP financial measure, net income 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;
•net income attributable to noncontrolling interests; and
•recoveries applied to negative allowance less changes in expected recoveries.
The following table is a reconciliation of net income as reported in accordance with GAAP to Adjusted EBITDA for the last 12 months ("LTM") as of June 30, 2023 and for the year ended December 31, 2022 (amounts in thousands):
Reconciliation of Non-GAAP Financial Measures
LTMFor the Year Ended
June 30, 2023December 31, 2022
Net income/(loss) attributable to PRA Group, Inc.$(21,740)$117,147 
Adjustments:
Income tax expense926 36,787 
Foreign exchange gains(618)(985)
Interest expense, net148,672 130,677 
Other expense (1)
1,534 1,325 
Depreciation and amortization14,671 15,243 
Adjustment for net income attributable to noncontrolling interests13,243 851 
Recoveries applied to negative allowance less Changes in expected recoveries836,629 805,942 
Adjusted EBITDA$993,317 $1,106,987 
(1) Other expense reflects non-operating related activity.
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 ratios of Debt to Adjusted EBITDA for the LTM as of June 30, 2023 and for the year ended December 31, 2022 (amounts in thousands):
Debt to Adjusted EBITDA
LTMFor the Year Ended
June 30, 2023December 31, 2022
Borrowings$2,739,667 $2,494,858 
Adjusted EBITDA993,317 1,106,987 
Debt to Adjusted EBITDA2.76x2.25x




44

Domestic Portfolio Purchases by Delinquency Category

Amounts in thousand
 2017 2016 2015
 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4
Fresh (1)
$67,540
 $73,813
 $43,786
 $30,919
 $30,114
 $42,048
 $37,036
 $37,450
Primary (2)
1,623
 4,314
 726
 2,672
 1,568
 29,990
 26,240
 37,994
Secondary (3)
43,366
 52,217
 49,794
 48,005
 51,630
 51,019
 43,841
 36,804
Tertiary (3)
524
 —
 1,111
 557
 —
 —
 1,843
 2,298
Insolvency73,497
 100,040
 67,123
 20,930
 11,145
 13,702
 22,952
 20,589
Other (4)
—
 11,010
 6,726
 686
 679
 490
 1,208
 907
Total$186,550
 $241,394
 $169,266
 $103,769
 $95,136
 $137,249
 $133,120
 $136,042

(1)Fresh accounts are typically past due 120 to 270 days, charged-off by the credit originator and are either being sold prior to any post-charge-off collection activity or placement with a third-party for the first time.
(2)Primary accounts are typically 360 to 450 days past due and charged-off and have been previously placed with one contingent fee servicer.
(3)Secondary and tertiary accounts are typically more than 660 days past due and charged-off and have been placed with two or three contingent fee servicers.
(4)Other accounts are typically two to three years or more past due and charged-off and have previously been worked by four or more contingent fee servicers.
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. As of SeptemberJune 30, 2017,2023, cash and cash equivalents totaled $113.8 million. Of the cash and cash equivalent balance as$111.4 million, of September 30, 2017, $95.3which $83.2 million consisted of cash on hand related to foreigninternational operations with indefinitely reinvested earnings. See the "Undistributed Earnings of ForeignInternational Subsidiaries" section below for more information.
Borrowings.At SeptemberJune 30, 2017,2023, we had approximately $2.0 billion inthe following borrowings outstanding with $1.0 billion ofand availability under all our credit facilities (subject to the(amounts in thousands):
OutstandingAvailable without Restrictions
Available with Restrictions (1)
Americas revolving credit (2)
$273,397 $802,926 $109,047 
UK revolving credit512,791 287,209 55,951 
European revolving credit476,089 358,469 167,493 
Term loan445,000 — — 
Senior Notes1,046,000 — — 
Less: Debt discounts and issuance costs(13,610)— — 
Total$2,739,667 $1,448,604 $332,491 
(1) Available borrowings after calculation of current borrowing base and applicable debt covenants). Considering borrowing base restrictions,covenants as of SeptemberJune 30, 2017, the amount available to be drawn was $618.8 million. Of the $1.0 billion of borrowing availability, $566.2 million was available under our European2023.
(2) Includes North American revolving credit facility and $479.6 million was availableColombian revolving credit facility.
On June 1, 2023, we used substantially all of the net proceeds received from the 2028 Notes to retire the 2023 Notes. 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 American credit facility. Of the $618.8 million available considering borrowing base restrictions, $165.4 million was available under our European credit facility and $453.5 million was available under our North American credit facility. The primary borrowing base under both credit facilities is ERC of the respective finance receivables portfolios. For more information, see Note 4.America Credit Agreement.
An additional funding source is interest-bearing deposits generated in Europe. Interest-bearing deposits. Per the terms of our European credit facility, we are permitted to obtain interest-bearing deposit funding of up to SEK 1.51.2 billion (approximately $183.9(the equivalent of approximately $110.8 million as of SeptemberJune 30, 2017)2023). Interest-bearing deposits as of SeptemberJune 30, 2017 were $96.42023 were $99.3 million.
We believeFurthermore, we were in compliance with the covenants of our material financing arrangements as of September 30, 2017.
As discussed in Note 11, we sold our government services business in January 2017 for approximately $91.5 million and our vehicle location, skip tracing and collateral recovery business in June 2017 for approximately $4.5 million.
We have the ability to slow the purchasingpurchase of finance receivablesnonperforming loans if necessary, with low impactand use the net cash flow generated from our cash collections from our portfolio of existing nonperforming loans to current year cash collections.temporarily service our debt and fund existing operations. For example, thewe invested $850.0 million in portfolio acquisitions in 2022. The portfolios purchasedacquired in 20162022 generated $204.1$109.4 million of cash collections, representing only 13.7%6.3% of 20162022 cash collections.
Uses of Liquidity and Material Cash Requirements
Forward Flows. Contractual obligations over the next year are primarily related to debt maturities andportfolio purchase commitments. Our North American credit facility expires in May 2022. Our European credit facility expires in February 2021. Of our $762.9 million in long-term debt outstanding at SeptemberAs of June 30, 2017, $10.0 million is due within one year.
We2023, we have in place forward flow commitments in place for the purchase of nonperforming loans over the next 12 months with a maximum purchase priceprice of $413.6$557.7 million, as of September 30, 2017.which $535.0 million is due within the next 12 months. The $557.7 million is comprised of $398.4 million for the Americas and Australia and $159.3 million for Europe. We may also enter into new or renewed forward flow commitments and close on spot transactions in addition to the aforementioned forward flow agreements.

Borrowings. Of our $2.7 billion borrowings at June 30, 2023, estimated interest, unused fees and principal payments for the next 12 months are approximately $192.6 million, of which, $10.6 million relates to principal, primarily reflecting the term loan under our North American Credit Agreement. Beyond 12 months our principal payment obligations related to debt maturities occur between one and six years. Many of our financing arrangements include restrictive covenants with which we must comply. As of June 30, 2023, we determined that we were in compliance with these covenants.

For tax purposes,Share Repurchases. On February 25, 2022, we utilized the cost recovery methodcompleted our $230.0 million share repurchase program. Also on February 25, 2022, our Board of accounting through December 31, 2016. The Internal Revenue Service ("IRS") examined our 2005 through 2012 tax returns and asserted that tax revenue recognition using the cost recovery method did not clearly reflect taxable income and therefore issued Notices of Deficiency to us for tax years ended December 31, 2005 through 2012 (the "Notices"). In response to the Notices, we filed petitions in the U.S. Tax Court (the "Tax Court") challenging the deficiencies and the Tax Court set the trial to begin on May 15, 2017. On May 10, 2017, we reached a settlement with the IRS in regards to the Notices. Under the settlement, both parties agreed that no amounts were due for years 2005 through 2012 and the Tax Court entered decisions to that effect on June 22, 2017. Also, under the settlement, we agreed to utilizeDirectors approved a new tax accounting method to recognize net finance receivables revenue effective with tax year 2017. Under the new method, a portion of the annual collections will amortize principal and the remaining portion will be considered taxable income. We will not be required to pay any interest or penalties related to the prior periods. The deferred tax liability related to the difference in timing between the new method and the prior method will be incorporated evenly into our tax filings over four years with no associated interest. Based on current tax rates, we estimate the related tax payments to be approximately $14.5 million per quarter.
On October 22, 2015, our board of directors authorized a share repurchase program under which we are authorized to purchaserepurchase up to $125.0$150.0 million of our outstanding shares of common stock. Repurchases depend on prevailingmay be made from time-to-time in open market transactions, through privately negotiated transactions, in block transactions, through purchases made in accordance with
45

trading plans adopted under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended (the "Exchange Act") or other methods, subject to market and/or other conditions and other factors.applicable regulatory requirements. 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. During the second quarter of 2017,three months ended June 30, 2023, we repurchased approximately $44.9 milliondid not repurchase any shares of our outstanding shares of common stock. At SeptemberAs of June 30, 2017, the maximum2023, we had $67.7 million remaining purchase price for share repurchases under the program was approximately $0.1 million.new program. For more information, see Item 2 included in Part II of this Quarterly Report.
Leases. Our leases have remaining lease terms of one to thirteen years. As of June 30, 2023, we had $55.7 million in lease liabilities, of which approximately $10.4 million matures within the next 12 months. For more information, see Note 5 to our Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report.
Derivatives. Derivative financial instruments are entered into to reduce our exposure to fluctuations in interest rates on variable rate debt and foreign currency exchange rates. As of June 30, 2023, we had $9.1 million of derivative liabilities, all of which mature within the next 12 months. For more information, see Note 7 to our Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report.
We believe that funds generated from operations and from cash collections on finance receivables,nonperforming loan portfolios, together with existing cash, and available borrowings under our revolving credit facilities and access to the capital markets will be sufficient to finance our operations, planned capital expenditures, forward flow purchase commitments, debt maturities and additional portfolio purchasingpurchases during the next 12 months.months and beyond. We may seek to access the debt or equity capital markets as we deem appropriate, market conditions permitting. Business acquisitions adverse outcomes in pending litigation or higher than expected levels of portfolio purchasing could require additional financing from other sources.
Cash FlowsFlow Analysis
OurThe following table summarizes our cash flow activity for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 (amounts in thousands):
Six Months Ended June 30,
20232022$ Change
Net cash provided by/(used in):
Operating activities$(80,839)$(41,764)$(39,075)
Investing activities(93,967)147,010 (240,977)
Financing activities208,496 (110,244)318,740 
Effect of exchange rate on cash6,216 (14,958)21,174 
Net increase/(decrease) in cash and cash equivalents$39,906 $(19,956)$59,862 
Operating Activities
Net cash provided by/(used in) operating activities used cash of $10.9 million and provided cash of $118.9 million for the nine months ended September 30, 2017 and 2016, respectively. Key drivers of the change includedmainly reflects cash collections recognized as revenue and cash paid for operating expenses, interest and income tax payments,taxes. 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 provisions for unrealized gains and losses, changes in accrued expensesexpected recoveries, depreciation and otheramortization, 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 interesttiming of payments. Cash
Net cash used in operating activities of $80.8 million for the six months ended June 30, 2023 increased $39.1 million from net cash used in operating activities of $41.8 million for the six months ended June 30, 2022. The change was mainly driven by lower cash collections recognized as revenue declined $30.6 million, as previously described inportfolio income and the revenues discussion and analysis. Cash paid for income taxes increased $55.4 million, and included $23.4 million related to the saleimpact of our government services business. Income tax payments also included $43.8 million related to payment of the deferred tax liability discussed earlier in this section. Accrued expenses decreased $7.2 million and $12.3 million for the nine months ended September 30, 2017 and 2016, respectively. Decreases in accrued expenses for both periods were due to various factors including litigation settlement payments. Other liabilities decreased $9.6 million for the nine months ended September 30, 2017, compared to an increase of $0.6 million for the nine months ended September 30, 2016. The decrease in other liabilities during the nine months ended September 30, 2017, was mainly due to deferred payments for portfolio purchases. The increase in other liabilities during the nine months ended September 30, 2016, was mainly due to the timing of client remittances in our fee-based businesses. Interest payments increased $10.7 million due primarily to increased borrowings including the 2023 Notes issued in May 2017, and to increases in interest rates and unused line fees.foreign exchange.
Our investing activities used cash of $77.7 million and $236.3 million for the nine months ended September 30, 2017 and 2016, respectively. Investing Activities
Cash provided by investing activities is primarily driven by cash collectionsrecoveries applied to principal on finance receivables.our negative allowance. Cash used in investing activities isprimarily relates to acquisitions of nonperforming loans and net investment activity.
Net cash provided by/(used in) investing activities decreased $241.0 million during the six months ended June 30, 2023, primarily driven by acquisitions of nonperforming loans. The decrease in net cash used in investing activities is primarily due to the sale of subsidiaries during the nine months ended September 30, 2017, which provided us with net proceeds of $93.3 million; a decrease in business acquisitions, which totaled $0.0 million during the nine months ended September 30, 2017, compared to $67.0 million during the nine months ended September 30, 2016; and an increase of $180.7 million in the amounts of acquisitionspurchases of finance receivables, which totaled $718.6an increase of $57.8 million during the nine months ended September 30, 2017, comparedin purchases
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of investments and a decrease of $71.6 million in recoveries applied to $697.8negative allowance. These items were partially offset by an increase of $62.0 million during nine months ended September 30, 2016.in proceeds from sales and maturities of investments.
Our financing activitiesFinancing Activities
Cash provided cash of $99.3 million and $93.1 million for the nine months ended September 30, 2017 and 2016, respectively. Cash forby financing activities is normally provided by draws on our lines of credit.credit and proceeds from debt offerings. Cash used in financing activities is primarily driven by principal payments on our lines of credit and long-term debt. The change in
Net cash provided byby/(used in) financing activities for the nine months ended September 30, 2017 compared to nine months ended September 30, 2016 was primarily due to an increase in the rate of growth of our borrowings, offset partially by repurchases of our common stock. During the nine months ended September 30, 2017, net proceeds from borrowing activities was $156.1 million compared to $73.8increased $318.7 million during the ninesix months ended SeptemberJune 30, 2016. Repurchases2023, primarily driven by proceeds from the issuance of our 2028 Notes of $400.0 million, a $179.5 million increase from net payments on our lines of credit in the prior year to net draws on our lines of credit in the current year and a decrease in our purchases of common stock totaled $44.9 million duringof $86.4 million. These items were partially offset by the nine months ended September 30, 2017, compared to $0.0 million during the nine months ended September 30, 2016. Additionally, during the the nine months ended September 30, 2017 we had a increase in interest bearing depositsretirement of $10.1 million, compared to $40.2 million during the nine months ended September 30, 2016.


our 2023 Notes of $345.0 million.
Undistributed Earnings of ForeignInternational Subsidiaries
We intend to use predominantly all of our accumulated and future undistributed earnings of foreigninternational subsidiaries to expand operations outside the U.S.; therefore, such undistributed earnings of foreigninternational subsidiaries are considered to be indefinitely reinvested outside the U.S. Accordingly, no provision for federalincome tax and state incomewithholding tax has been provided thereon. If management's intentions change and eligible undistributed earnings of foreigninternational subsidiaries are repatriated, we wouldcould be subject to additional U.S. income taxes and withholding taxes payable to various foreign jurisdictions, where applicable.taxes. This could result in a higher effective tax rate in the period in which such a decision is made to repatriate accumulated or future undistributed foreigninternational earnings. The amount of cash on hand related to foreigninternational operations with indefinitely reinvested earningsearnings was $95.3$83.2 million and $73.6and $75.3 million as of SeptemberJune 30, 20172023 and December 31, 2016,2022, respectively. Refer to the Note 611 to our Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report for further information related to our income taxes and undistributed foreigninternational earnings.
Contractual Obligations
Our contractual obligations as of September 30, 2017 were as follows (amounts in thousands):
  Payments due by period
Contractual Obligations Total Less than 1 year 1 - 3 years 3 - 5 years More than 5 years
Operating leases $43,807
 $11,305
 $14,179
 $9,243
 $9,080
Revolving credit (1)
 804,782
 40,749
 80,176
 682,530
 1,327
Long-term debt (2)
 1,714,142
 61,660
 409,299
 886,108
 357,075
Purchase commitments (3)
 413,570
 413,570
 —
 —
 —
Employment agreements 11,794
 6,419
 4,250
 1,125
 —
Total $2,988,095
 $533,703
 $507,904
 $1,579,006
 $367,482
(1)This amount includes estimated interest and unused line fees due on our revolving credit and assumes that the outstanding balances on the revolving credit remain constant from the September 30, 2017 balances to maturity.
(2)This amount includes scheduled interest and principal payments on our term loans and convertible senior notes.
(3)This amount includes the maximum remaining amount to be purchased under forward flow and other contracts for the purchase of nonperforming loans in the amount of approximately $413.6 million.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements as defined by Item 303(a)(4) of Regulation S-K promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Recent Accounting Pronouncements
For a summary of recent accounting pronouncements and the anticipated effects on our consolidated financial statementsConsolidated Financial Statements see Note 10.13 to our Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report.
Critical Accounting Policies and Estimates
Our consolidated financial statementsConsolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles. OurGAAP. Some of our significant accounting policies are discussed in Note 1 to our consolidated financial statements included in Part II, Item 8 of our 2016 Form 10-K. Our significant accounting policies are fundamental to understanding our results of operations and financial condition because they require that we use estimates, assumptions and judgments that affect the reported amounts of revenues, expenses, assets and liabilities. For a discussion of our significant accounting policies, refer to Note 1 to our Consolidated Financial Statements included in Item 8 of our 2022 Form 10-K.
Three of these policies are consideredWe consider accounting estimates to be critical because theyif (1) the accounting estimates made involve a significant level of estimation uncertainty and (2) have had or are importantreasonably likely to the portrayal ofhave a material impact on our financial condition andor results and because they require management to make judgments and estimates that are difficult, subjective, and complex regarding matters that are inherently uncertain.
of operations.We base our estimates on historical experience, current trends and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. If these estimates differ significantly from actual results, the impact on our consolidated financial statementsConsolidated Financial Statements may be material.
Management has reviewed these criticalWe have determined that the following accounting policies with the Audit Committee of our board of directors.


involve critical estimates:
Revenue Recognition - Finance Receivables
We account for our investment in finance receivables under the guidance of ASC 310-30. Revenue recognition for finance receivables accounted for under ASC 310-30 involves the use of estimates and the exercise of judgment on the part of management. These estimates include projections of the quantityamount and timing of future cash flows and economic lives ofcollections we expect to receive from our pools of finance receivables. Significant changes in such estimates could result in increased revenue or decreased revenue through the incurrence of allowance charges.
accounts. We implement the accounting for income recognized on finance receivables under ASC 310-30 as follows:
We create each accounting pool using our projections of estimated cash flows and expected economic life. We then compute the effective yield that fully amortizes the pool over a reasonable expectation of its economic life based on the current projections of estimated cash flows. As actual cash flow results are recorded, we balance those results to the data contained in our proprietary models to ensure accuracy, then review each pool watchingindividual pools for trends, actual performance versus projections and curve shape (a graphical depiction of the amount and timing of cash flows), regularly re-forecastingcollections). We then project ERC and then apply a discounted cash flow methodology to our ERC. 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 that could impact TEC.
Significant changes in our cash flows utilizing our statistical models. The review process is primarily performed by our finance staff; however, our operational and statistical staff are also involved, providing updated statistical input and cash projections to the finance staff. Significant judgment is usedflow estimates could result in evaluating whether overperformance is due to an increase in projected cash flowsincreased or an acceleration of cash flows (a timing difference). If determined to be a significant increase in expected cash flows,decreased revenue as we willimmediately recognize the effectdiscounted value of such changes using the constant effective interest rate of the increase prospectively first throughpool. Generally, adjustments to estimated cash forecasts for performance experienced in the current period result in an adjustment to any previously recognized valuation allowance for that pool and then throughrevenue at an increaseamount less than the impact of the performance in yield. If the overperformance is determined to beperiod due to a timing difference, we will: a) adjust estimated futurethe effects of discounting. Additionally, cash flows downward which effectively extendscollection forecast increases will generally result in more revenue being recognized and cash collection forecast decreases in less revenue being recognized over the amortization period to fall within a reasonable expectationlife of the pool's economic life; b) adjust future cash flow projections as noted previously coupled with an increase in yield in order for the amortization period to fall within a reasonable expectation of the pool's economic life; or c) take no action at all if the amortization period falls within a reasonable expectation of the pool's expected economic life. To the extent there is underperformance, we will record an allowance if the underperformance is significant and causes us to significantly decrease estimated future cash flows or delay the expected timing of the cash flows, or take no action if the pool's amortization period is reasonable and falls within the currently projected economic life.pool.
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Valuation of Acquired Intangibles and Goodwill
In accordance with FASB ASC Topic 350, "Intangibles-Goodwill and Other" ("ASC 350"), we amortize intangible assets over their estimated useful lives. Goodwill, pursuant to ASC 350, is not amortized but rather evaluatedevaluate goodwill for impairment annually and more frequently if indicators of potential impairment exist. Goodwill is reviewed for potential impairment at the reporting unit level. A reporting unit is an operating segment or one level below an operating segment.
Goodwill is evaluated for impairment either under the qualitative assessment option or the two-step testusing a quantitative forecast approach depending on facts and circumstances of a reporting unit, including the excess of fair value over carrying amount in the last valuation, or changes in the business environment.environment and changes of the reporting unit or its composition. If upon evaluation of the qualitative factors, we qualitatively determine it is more likely than not that the fair value of a reporting unit is greaterless than its carrying amount, the two-step impairment test is unnecessary. Otherwise, goodwill is evaluated for impairment using the two-step test, where the carrying amount of a reporting unit is comparedthen we are required to its fair value in Step 1; if the fair value exceeds the carrying amount, Step 2 is unnecessary. If the carrying amount exceedsdetermine the reporting unit’s fair value this could indicate potentialand record as an impairment and Step 2 of the goodwill evaluation process is required to determine if goodwill is impaired and to measureloss the amount of impairment loss to recognize, if any. When Step 2 is necessary, the carrying value exceeds fair value, of individual assets and liabilities is determined using valuations (which in some cases may be based in part on third-party valuation reports), or other observable sources of fair value, as appropriate. Ifnot to exceed the carryingtotal amount of goodwill exceeds its implied fair value,allocated to the excess is recognized as an impairment loss.respective reporting unit.
We determine the fair value of a reporting unit by applying the approaches prescribed under the fair value measurement accounting framework:ASC Topic 820 "Fair Value Measurements and Disclosures": the income approach and the market approach. Depending on the availability of public data and suitable comparables, we may or may not use the market approach or we may emphasize the results from the approach differently. Under the income approach, we estimate the fair value of a reporting unit based on the present value of estimated future cash flows and a residual terminal value. Cash flow projections are based on management's estimates of revenue growth rates, operating margins, necessary working capital and capital expenditure requirements, taking into consideration industry and market conditions. The discount rate used is based on the weighted-average cost of capital adjusted for the relevant risk associated with business-specific characteristics and the uncertainty related to the reporting unit's ability to execute on the projected cash flows. Under the market approach, we estimate fair value based on prices and other relevant market transactions involving comparable publicly-traded companies with operating and investment characteristics similar to the reporting unit.


Income Taxes
We are subject to income taxes throughout the income tax laws of the various jurisdictionsU.S. and in which we operate, including U.S. federal, state, local, and internationalnumerous international jurisdictions. These tax laws are complex and are subject to different interpretations by the taxpayer and the relevant government taxing authorities. When determining our domestic and foreignnon-U.S. income tax expense, we must make judgments about the application of these inherently complex laws.
We follow the guidance of FASB ASC Topic 740 "Income Taxes" ("ASC 740") as it relates to the provision for income taxes and uncertainty in income taxes. Accordingly, we record a tax provision for the anticipated tax consequences of the reported results of operations. In accordance with ASC 740, theThe provision for income taxes is computedestimated using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities, and for operating losses and tax credit carry-forwards.carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those tax assets are expected to be realized or settled. The evaluation of
We exercise significant judgment in estimating the potential exposure to unresolved tax matters and apply a more likely than not criteria approach for recording tax positionbenefits related to uncertain tax positions in accordance with the guidance is a two-step process. The first step is recognition: the enterprise determines whether it is more-likely-than-not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical meritsapplication of the position. In evaluating whether acomplex tax position has metlaws. While actual results could vary, we believe we have adequate tax accruals with respect to the more-likely-than-not recognition threshold, the enterprise should presume that the position will be examined by the appropriate taxing authority that would have full knowledgeultimate outcome of all relevant information. The second step is measurement: asuch unresolved tax position that meets the more-likely-than-not recognition threshold is measured to determine the amount of benefit to recognize in the financial statements. The tax position is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not recognition threshold should be derecognized in the first subsequent financial reporting period in which that threshold is no longer met.matters. We record interest and penalties related to unrecognizedunresolved tax benefitsmatters as a component of income tax expense.expense when the more likely than not standards are met.
In the event thatIf all or part of the deferred tax assets are determined not to be realizable in the future, we would establish a valuation allowance would be established and chargedcharge to earnings the impact in the period such a determination is made. 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 in the period such determination is made.earnings. The establishment or release of a valuation allowance does not have an impact on cash, nor does such an allowance preclude the use of loss carry-forwardscarryforwards or other deferred tax assets in future periods. The calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the application of complex tax laws. Resolution of these uncertainties in a manner inconsistent with our expectations could have a material impact on our results of operations and financial position.
Our international operations require the use of material estimates and interpretations of complex For further information regarding our uncertain tax lawspositions, refer to Note 13 to our Consolidated Financial Statements included in multiple jurisdictions, and increases the complexityItem 8 of our accounting for income taxes.2022 Form 10-K.
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Item 3. Quantitative and Qualitative Disclosures aboutAbout 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. 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. We do not utilize derivative financial instruments with a level of complexity or with a risk greater than the exposure to be managed, nor do we enter into or hold derivatives for trading or speculative purposes. Derivative instruments involve, to varying degrees, elements of non-performance, or credit risk. 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. 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. 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. The borrowings on our variable rate credit facilities were approximately $1.4approximately $1.7 billion as of Septemberof June 30, 2017. Assuming2023. Based on our debt structure at June 30, 2023, assuming a 50 basis point decrease in interest rates, for example, interest expense over the following 12 months would decrease by an estimated $5.3$5.4 million. Assuming a 50 basis point increase in interest rates, interest expense over the following 12 months would increase by an estimated $5.3$5.4 million.
To reduce the exposure to changes in the market rate of interest and to comply with the terms of our European and our UK revolving credit facilities, we have entered into interest rate swap agreementsderivative contracts for a portion of our borrowings under our floating rate financing arrangements. The termsAs of June 30, 2023, we are 62% 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 June 30, 2023. Terms of the interest rate swap agreementsderivative contracts require us to receive a variable interest rate and pay a fixed interest rate. For the majority of our floating rate financing arrangements, we have no interest rate swap agreements in place. The sensitivity calculations above consider the impact of our interest rate swap agreements.
The fair value of ourderivative contracts and zero interest rate swap agreements was a net liability of $0.7 million at September 30, 2017. A hypothetical 50 basis point decrease in interest rates would cause a decrease in the estimated fair value offloors on revolving loans under our interest rate swap agreementsNorth America, UK and the resulting estimated fair value would be a liability of $6.0 million at September 30, 2017. Conversely, a hypothetical 50 basis point increase in interest rates would cause an increase in the estimated fair value of our interest rate swap agreements and the resulting estimated fair value would be an asset of $4.1 million at September 30, 2017.


European credit facilities.
Currency Exchange Risk
We operate internationally and enter into transactions denominated in various foreign currencies, including the European Union euro, the Great British pound, the Canadian dollar, Norwegian kroner, Swiss franc, Danish kroner, Swedish kroner, Polish zloty, and Brazilian real. Incurrencies. During the three months ended SeptemberJune 30, 2017,2023, we generated $63.7generated $115.0 million of revenuesrevenues from operations outside the U.S. and used eight12 functional currencies.currencies, excluding the U.S. dollar. Weakness in one particular currency might be offset by strength in other currencies over time.
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.
Foreign currency exchange gains and losses are primarily the result of the re-measurement of account balancestransactions 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.Consolidated Income Statements. From time to time, we may elect to enter into foreign exchange derivative contracts to reduce these variations in our Consolidated Income Statements.
When an entity's functional currency is different than the reporting currency of its parent, foreign currency translation adjustments may occur. Foreign currency translation adjustments are included as a component of other comprehensive income/(loss)/income in our consolidated statementsConsolidated Statements of comprehensive incomeComprehensive Income and as a component of equity in our consolidated balance sheets.Consolidated Balance Sheets.
We have taken measures to mitigate the impact of foreign currency fluctuations. We have restructuredorganized our European operations sosuch that portfolio ownership and collections generally occur within the same entity. Our UK and European credit facility is afacilities are multi-currency facility,facilities, allowing us to better match funding and portfolio investmentsacquisitions by currency. We strive to maintainactively monitor the distribution of our European borrowings within defined thresholds based on the currency compositionvalue of our finance receivables portfolios. When those thresholdsby currency. In the event adjustments are exceeded,required to our liability composition by currency, we engage inmay, from time to time, execute re-balancing foreign exchange spot transactionscontracts to mitigate our risk.more closely align funding and portfolio acquisitions by currency.
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Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures. We maintain disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’sSEC's rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate. We conducted an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report. Based on this evaluation, the principal executive officer and principal financial officer have concluded that, as of SeptemberJune 30, 2017,2023, our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting. There was no change in our internal control over financial reporting that occurred during the quarter ended SeptemberJune 30, 20172023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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Part II. Other Information
Item 1. Legal Proceedings
For information regarding legal proceedings as of SeptemberJune 30, 2017,2023, refer to Note 8.12 to our Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report.
Item 1A. Risk Factors
There have been no material changes to thein our risk factors from those disclosed in Part I, Item 1A, of our 20162022 Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.Share Repurchase Programs
On February 25, 2022, our Board of Directors approved a share repurchase program under which we are authorized to repurchase up to $150.0 million of our outstanding common stock. For more information, see Part I, Item 2 "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources" in this Quarterly Report. We did not repurchase any common stock during the quarter ended June 30, 2023.
We do not currently pay regular dividends on our common stock and did not pay dividends during the three months ended June 30, 2023; however, our Board of Directors may determine in the future to declare or pay dividends on our common stock.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.None of the Company's directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or non-rule 10b5-1 trading arrangement during the three months ended June 30, 2023.
Item 6. Exhibits
FourthFifth Amended and Restated Certificate of Incorporation of PRA Group, Inc. (Incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K filed June 17, 2020 (File No. 000-50058) filed on October 29, 2014)).
Amended and Restated By-Laws of PRA Group, Inc. (Incorporated by reference to Exhibit 3.13.2 of the Current Report on Form 8-K (Filefiled June 17, 2020 (File No. 000-50058) filed on May 22, 2015)).
Form of Common Stock Certificate (Incorporated by reference to Exhibit 4.1 of Amendment No. 1 to the Registration Statement on Form S-1 filed October 15, 2002 (Registration No. 333-99225) filed on October 15, 2002)).
Form of Warrant (Incorporated by reference to Exhibit 4.2 of Amendment No. 2 to the Registration Statement on Form S-1 filed October 30, 2002 (Registration No. 333-99225) filed on October 30, 2002)).
Indenture dated August 13, 2013 between Portfolio Recovery Associates, Inc. and Wells Fargo Bank, National Association, as trustee (Incorporated by reference to Exhibit 4.1 of the Current Report on Form 8-K (File No. 000-50058) filed on August 14, 2013).
4.4
Indenture, dated May 26, 2017 between PRA Group, Inc. and Regions Bank, as trustee (Incorporated by reference to Exhibit 4.1 of the Current Report on Form 8-K (Filefiled May 26, 2017 (File No. 000-50058) filed on May 26, 2017)).
Section 302 CertificationsFirst Supplemental Indenture, dated as of Chief Executive Officer.March 31, 2021 between PRA Group, Inc. and Regions Bank, as trustee (Incorporated by reference to Exhibit 4.4 of the Quarterly Report on Form 10-Q filed August 05, 2021 (File No. 000-50058)).
Section 302 CertificationsIndenture, dated as of Chief Financial Officer.August 27, 2020 among PRA Group Inc., the domestic subsidiaries of PRA Group Inc., party thereto and Regions Bank as trustee (Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed September 1, 2020(File No. 000-50058)).
Indenture, dated as of September 22, 2021 among PRA Group Inc., the domestic subsidiaries of PRA Group Inc., party thereto and Regions Banks, as trustee (Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed September 24, 2021 (File No. 000-50058)).
Indenture, dated as of February 6, 2023, among PRA Group, Inc., the domestic subsidiaries of PRA Group, Inc., party thereto and Regions Bank, as trustee (Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed February 6, 2023 (File No. 000-50058)).
Description of the Registrant's Securities Registered pursuant to Section 906 12 of the Securities Exchange Act of 1934 (Incorporated by reference to Exhibit 4.3 of the Annual Report on Form 10-K filed February 26, 2021(File No. 000-50058)).
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Seventh Amendment to the Credit Agreement, dated April 24, 2023 by and among PRA Group Inc. and PRA Group Canada Inc., the Guarantors, the Lenders party thereto Bank of America, N.A., as Administrative Agent and Bank of America, N.A., acting through its Canada Branch as Canadian Administrative Agent (filed herewith).
LIBOR Transition Amendment to the Credit Agreement, dated April 24, 2023, by and among PRA Group, Inc. and PRA Group Canada Inc., the Guarantors, the Lenders party thereto Bank of America, N.A., as Administrative Agent and Bank of America, N.A., acting through its Canada Branch as Canadian Administrative Agent (filed herewith).
Separation and Transition Services Agreement dated as of May 31, 2023, between Registrant and Christopher B. Graves.
Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002 (filed herewith).
Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002 (filed herewith).
Certifications of Chief Executive Officer and Chief Financial Officer.Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002 (filed herewith).
101.INSXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCHXBRL Taxonomy Extension Schema Document
101.CALXBRL Taxonomy Extension Calculation Linkable Document
101.LABXBRL Taxonomy Extension Label Linkable Document
101.PREXBRL Taxonomy Extension Presentation Linkable Document
101.DEFXBRL Taxonomy Extension Definition Linkbase Document
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
*Denotes management contract or compensatory plan or arrangement in which directors or executive officers are eligible to participate.





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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
PRA Group, Inc.
(Registrant)
November 8, 2017August 7, 2023By:/s/ Kevin P. StevensonVikram A. Atal
Kevin P. StevensonVikram A. Atal
President and Chief Executive Officer
(Principal Executive Officer)
August 7, 2023By:
November 8, 2017By:/s/ Peter M. Graham
Peter M. Graham
Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)


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