Portfolio Recovery Associates, Inc.’s (PRAA) fourth quarter earnings per share of 80 cents came in way ahead of the Zacks Consensus Estimate of 72 cents and the year-ago quarter earnings of 69 cents. Net income increased 17% year-over-year to $12.4 million. During the reported quarter, the company recorded an ongoing non-cash equity-based compensation expense of $0.58 million, equivalent to approximately $0.36 million after tax or 2 cents per share.
Overall, Portfolio Recovery’s results reflected higher-than-expected top-line growth due to record cash collections and record cash receipts, which was partially offset by seasonal weakness in consumer collections and a $9.5 million allowance charge recorded in the reported quarter. Operating expenses increased 9.4% year-over-year to $51.1 million during the quarter.
Portfolio Recovery’s total revenue increased 9.3% to $73.2 million from $67.0 million in the year-ago period. While net income recognized on finance receivables increased 16.5% year-over-year to $56.0 million, commissions decreased by 8.7% to $17.3 million. During the reported quarter, the company utilized 41.3% of cash collections to reduce the carrying basis of its owned debt portfolios against 39.3% in the year-ago period.
Cash collections for Portfolio Recovery increased 20% to $95.3 million from $79.2 million in the year-ago period. Call center and other collections increased 10%, internal legal collections grew 185% and purchased bankruptcy collections gained 59%;, while external legal collections decreased 16%, when compared with the prior-year quarter.
For full year 2009, net income decreased to $44.3 million or $2.87 per share as compared to $45.4 million or $2.97 per share in 2008. Total revenues increased 6.8% year-over-year to $281.1 million. However, operating expenses increased 12.4% to $200.5 million.
Business Update
During the quarter, Portfolio Recovery cemented the foundation for long term growth by making $75.1 million in portfolio acquisitions by purchasing $2.0 billion of face-value debt. This debt was acquired in 101 portfolios from 13 different sellers to further improve the collector productivity and to initiate steps to strengthen the fee businesses. For full year 2009, Portfolio Recovery acquired $8.1 billion of face-value debt for $289 million.
At Dec 31, 2009 Portfolio Recovery’s cash balances were $20.3 million as compared to $13.9 million at Dec 31, 2008. During the reported quarter, the company made net borrowings of $13 million on its line of credit, leaving it with $319.3 million in outstanding borrowings at quarter’s end. At Dec 31, 2009, Portfolio Recovery had $45.7 million remaining under the line of available borrowing.
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