Portfolio Recovery Associates Inc.
) reported fourth-quarter 2012 income from continuing operations
of $2.10 per share, surpassing the Zacks Consensus Estimate of
$2.00. The results also exceeded the prior-year earnings of
In the quarter under review, the company's net income came in
at $35.8 million, up 35% from $26.6 million recorded in the
fourth quarter of 2011. Earnings were primarily driven by a surge
in revenues, which was attributable to the continuous improvement
in income from finance receivables and fees.
Portfolio Recovery's total revenue in the reported quarter was
$154.3 million, soaring 31% from $118.1 million in the year-ago
period. Revenue also exceeded the Zacks Consensus Estimate
of $148 million.
The boost in revenue was driven by an improvement of 25% in
cash receipts to $245.4 million from $195.7 million in the
prior-year quarter. Cash collections from finance receivables
also jumped 27% year over year to $229.2 million from $180.3
Call center and other collections posted a 19% increase,
external legal collections gained 58%, internal legal collections
surged 36% and purchased bankruptcy collections expanded 21%,
compared with the prior-year quarter.
Additionally, Portfolio Recovery's revenue from its finance
receivables income was $138.1 million, up 34% from $102.7 million
in the year-ago quarter. Fee income increased to $16.2 million
from $15.3 million, mainly due to the fee income from the UK
business, which more than offset the decrease in fee income from
the US fee-based businesses.
Operating expenses surged 31% year over year to $94.3 million,
while operating income also increased 31% to $60.0 million. As a
result, operating margin remained at the year-ago quarter level
of 38.9% in the quarter under review.
Full-Year 2012 Highlights
For full-year 2012, Portfolio Recovery reported operating
income per share of $7.39, which surpassed the Zacks Consensus
Estimate of $7.29 and prior-year earnings of $5.85.
Portfolio Recovery's revenue amounted to $592.8 million in
2012, showing a year-over-year increase from $458.9 million. The
company's full-year net income came in at $126.6 million, up 26%
from $100.8 million recorded in 2011.
Balance Sheet and Capital Structure
As of Dec 31, 2012, Portfolio Recovery's cash and cash
equivalents increased to $32.7 million from $26.7 million
recorded at the end of 2011.
The company had $127.0 million outstanding under its line of
credit as of Dec 31, 2012. The remaining borrowing availability
under the line was $273.0 million as of Dec 31, 2012.
Portfolio Recovery exited 2012 with total assets of $1.29
billion, increasing from $1.07 billion as of Dec 31, 2011.
Shareholders' equity stood at $708.4 million as of 2012-end,
compared with $595.5 million as of Dec 31, 2011.
Portfolio Recovery's bottom-line results have shown steady
improvement over the past few quarters. Strong cash collections
drove revenues upward, although operating margin remained
constant due to higher operating expenses, which offset the
increase in operating income. Income from both business lines
After posting weak results in many quarters, fee income has
been trending upward since the second quarter of 2012. Higher
cash balance and increased shareholders' equity strengthened the
balance sheet as well. Overall, the fourth-quarter results
Another business services outsourcing company -
) reported net income of $23.0 million or 66 cents per share in
the second quarter of fiscal 2013 (ended Dec 31, 2012) compared
with $31.7 million or 82 cents in the year-earlier quarter.
Although earnings decreased on a year-over-year basis, it was
well above the Zacks Consensus Estimate of 49 cents.
Portfolio Recovery carries a Zacks Rank #3 (Hold). Other
business services outsourcing companies worth considering are
Barrett Business Services Inc.
Broadridge Financial Solutions, Inc.
). Both these companies carry a Zacks Rank #2 (Buy).
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