Portfolio Recovery Associates Reports Large Gain in Net Income in Q3

Debt buyer Portfolio Recovery Associates, Inc. (Nasdaq: PRAA) said late Thursday that earnings in the third quarter of 2011 increased 38 percent while revenues and cash collections also posted large gains.

Norfolk, Va.-based Portfolio Recovery (PRA) reported net income of $25.5 million in Q3 2011, an increase of 38 percent over the comparable year-ago period. Earnings-per-share grew to $1.48.

Total revenues for the third quarter grew 20 percent to $114.3 million. PRA said that the increase was driven by record cash receipts of $193.6 million in the third quarter, up 27 percent from a year earlier. Cash receipts are comprised of both cash collections and revenues from the company’s fee-for-service businesses.

Cash collections rose 33 percent to a record $182.2 million in the third quarter of 2011. Call center and other collections increased 24 percent, external legal collections increased 35 percent, internal legal collections grew 36 percent, and purchased bankruptcy collections gained 40 percent to become the largest collection channel of the quarter for PRA.

PRA’s fee-for-service businesses generated revenues of $11.4 million in Q3 2011, a decline of 27 percent from the same period a year ago due largely to a decrease in revenues generated by PRA Location Services. Together, the fee-for-service businesses accounted for 10 percent of the company’s overall revenues in the quarter, down from 16 percent in the same period a year ago.

“Our third quarter results are indicative of our efforts to drive the top line, identify and improve operational efficiencies and maintain a strong and flexible capital structure,” said Steven D. Fredrickson, chairman, president and chief executive officer. “The key drivers of our results continue to be strong cash collections from both bankruptcy and core portfolios, supported by an impressive performance at our call centers. We were able to deliver these results despite a weak and volatile economy. Looking ahead, we will continue to focus on strengthening our core business, reducing costs and allocating the necessary resources to support continued growth in our fee-for-service businesses.”

PRA purchased $5.68 billion of face-value debt during the third quarter of 2011 for $122.1 million, up 32 percent from the amount spent in Q3 2010. This was acquired in 95 portfolios from 12 different sellers.

The company also reported that its collector employee count increased 7 percent from Q3 2010 to 1,520 while its total employee count grew 3 percent to 2,504. Both totals, however, were flat from the second quarter of this year.