Portfolio Recovery Associates Inc.
) reported third-quarter 2012 income from continuing operations
of $1.96 per share, surpassing the Zacks Consensus Estimate of
$1.85. The results also exceeded the prior-year earnings of
In the quarter under review, the company's net income came in
at $33.3 million, up 31% from $25.5 million recorded in the third
quarter of 2011. Earnings were primarily driven by strong
top-line growth attributable to continuous improvement in cash
Portfolio Recovery's total revenue in the reported quarter was
$150.5 million, soaring 32% from $114.3 million in the year-ago
period. Revenue also exceeded the Zacks Consensus Estimate
of $146 million.
The boost in revenue was driven by an improvement of 26% in
cash receipts to $243.8 million from $193.6 million in the
prior-year quarter. Cash collections also jumped 26% year over
year to $229.1 million from $182.2 million. Call center and other
collections posted a 13% increase, external legal collections
gained 47%, internal legal collections surged 56% and purchased
bankruptcy collections expanded 22%, compared with the prior-year
However, Portfolio Recovery's revenue from its fee income was
$14.8 million, up from $11.4 million in the year-ago quarter. The
increase was mainly due to the revenues from the UK business.
Operating expenses also surged 33% year over year to $93.5
million, while operating income spurred 30% to $57.1 million. As
a result, operating margin declined 50 basis points year over
year to 37.9% in the quarter under review.
Balance Sheet and Capital Structure
As of September 30, 2012, Portfolio Recovery's cash and cash
equivalents increased to $31.5 million from $26.7 million
recorded at the end of 2011.
The company had $250 million outstanding under its line of
credit as of September 30, 2012. The remaining borrowing
availability under the line was $214.5 million as of September
Portfolio recovery exited the quarter with total assets of
$1.17 billion and shareholders' equity of $670.5 million.
Portfolio Recovery's bottom-line results have shown steady
improvement over the past few quarters. Strong cash collections
coupled with improved operational efficiency led to an increase
in both the top and bottom lines in the reported quarter.
Even the fee income showed an upward movement in the second
and third quarters of 2012, after posting a series of weak
results. The balance sheet also strengthened with higher cash
balance and increased shareholders' equity.
Portfolio Recovery's competitor
Encore Capital Group Inc.
) will report its third-quarter financial results after the
market closes on November 1, 2012.
Portfolio Recovery carries a Zacks #3 Rank (short-term Hold)
indicating no clear directional pressure on the shares over the
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